Traderight (NSW) Pty Ltd v Bank of Queensland Ltd

1. [1]

   BATHURST CJ: I agree with Barrett JA.

2. [2]

   BEAZLEY P: I have had the advantage of reading in draft the detailed reasons of Barrett JA with which I agree. I agree with his Honour that the appeal be dismissed with costs.

3. [3]

   BARRETT JA: Bank of Queensland Ltd (“BOQ”) was established in 1874 as a building society. It later became a bank and has for several decades carried on the business of banking in Australia, principally in Queensland. The business is, in part, conducted through branches (and otherwise) by employees in the conventional way. In addition, BOQ appoints “franchisees” and enables them to undertake banking operations as its agents through so-called “owner managed branches” (or “OMBs”). That method of conducting business was adopted in 2001 for Queensland and was later extended beyond that State.

4. [4]

   In 2003, BOQ established internally an “interstate expansion team”. That group set about seeking expressions of interest from potential franchisees outside Queensland. Between relevantly August 2004 and April 2007, BOQ appointed a number of franchisees in New South Wales. Some of the franchise businesses were unsuccessful and their proprietors suffered losses that forced them to cease trading.

Proceedings brought between OMB franchisees and BOQ

1. [5]

   Over a period of about four years to 2010, no fewer than fourteen separate proceedings were commenced in respect of franchise arrangements for OMBs in New South Wales. In most cases, a franchisee sued BOQ (and sometimes individual officers). In some cases, however, it was BOQ that sued a franchisee. Some actions were brought in the Supreme Court of Queensland, some in the Federal Court of Australia, some in the Industrial Relations Commission of New South Wales and the remainder in the Supreme Court of New South Wales. The proceedings commenced otherwise than in the Supreme Court of New South Wales were ultimately cross-vested to that court.

2. [6]

   It will be necessary, in due course, to refer in some detail to the causes of action asserted by the franchisees. For the present, it is sufficient to note that the predominant allegations made by franchisees were that, in connection with the establishment of franchises, BOQ engaged in misleading or deceptive conduct or unconscionable conduct in contravention of the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (NSW) as in force at the relevant time; and that the franchisees thereby suffered loss or damage. Causes of action in tort (for negligent misstatement and other negligence) were also before the court, as were claims based on provisions of the Industrial Relations Act 1996 (NSW). In some of the proceedings, BOQ pursued debt claims against the franchisee and related claims against guarantors.

3. [7]

   The proceedings were heard by Ball J over 101 hearing days between September 2012 and October 2013. His Honour announced his decision on 13 February 2014: Traderight (NSW) Pty Ltd v Bank of Queensland Ltd (No 17) [2014] NSWSC 55. He found that none of the franchisees had established an entitlement to relief as against BOQ and that, in some cases, BOQ was entitled to a money judgment against a franchisee (and, if applicable, a guarantor or guarantors). Orders reflecting that decision were made on 14 April 2014. After a subsequent hearing, there were orders that the unsuccessful franchisees pay BOQ’s costs: Traderight (NSW) Pty Ltd v Bank of Queensland Ltd (No 18) [2014] NSWSC 733.

Appeal by franchisees

1. [8]

   By notice of appeal filed on 25 June 2014, the franchisee groups adversely affected by the orders of Ball J assert error correction of which requires the making of declarations that BOQ and other defendants engaged in conduct that was misleading or deceptive or likely mislead or deceive, contrary to s 52 of the Trade Practices Act or s 42 of the Fair Trading Act (as in force at the material time), by making certain statements or representations to franchisees and also by silence.

2. [9]

   The franchisee groups by which the appeal has been instituted are made up of a total of 36 persons and companies. It is sufficient to refer (as the primary judge did) to separate OMB franchisees by the following abbreviations with the relevant branch locality for each shown, together with the names of the franchisee’s principals and the date of opening of the OMB:

3. [10]

   Persons whose names are bracketed were investors who were not active in the operation of an OMB. Otherwise, the named persons were active in the respective businesses.

4. [11]

   As relevant to the issues raised by the notice of appeal, findings of the primary judge were, in summary, that

5. [12]

   References in these reasons to the Trade Practices Act and the Fair Trading Act are references to those Acts as they stood before the extensive amendments flowing from the adoption of the Australian Consumer Law in 2010. References to provisions of the two Acts are references to the provisions as in force at the time of relevant events.

6. [13]

   Two types of allegedly misleading or deceptive conduct were before the primary judge for consideration: conduct by way of the making of particular statements or representations; and conduct in the form of maintaining silence in circumstances where it was said to be misleading or deceptive not to speak.

7. [14]

   The notice of appeal, as filed, sets out 14 grounds of appeal. Of these, 11 are concerned with particular representations that the primary judge found had been made by officers or other representatives of BOQ to prospective franchisees. The representations fall into three groups described as “target statements” (grounds 1 to 5), “approval letter statements” (grounds 6 and 7) and “break-even statements” (grounds 8 to 11). The remaining grounds of appeal (grounds 12 to 14) are concerned with “pre-opening non-disclosure” and the proposition that BOQ contravened the statutory provisions by remaining silent.

8. [15]

   The “target statements” were, in broad concept, statements made on behalf of BOQ to the respective franchisees to the general effect that, from BOQ’s modelling, a metropolitan franchisee would need to write $4 million, and a regional franchisee $3 million, in new loans per month to have a successful business; and that a franchisee ought to be able to meet those targets. The “approval letter statements”, broadly expressed, were statements in BOQ’s approval letters to successful franchise applicants that BOQ expected franchisees to be writing $4 million new loans per month. The “break-even statements” were statements allegedly made by BOQ to the general effect that, from BOQ’s modelling, if a metropolitan franchisee wrote $4 million and a regional franchisee $3 million in new loans per month, there would be a break-even point of 8 to 12 months.

9. [16]

   I have given only a broad description of each type of relevant statement or representation since, naturally enough, each of the appellants, as a plaintiff, pleaded the use of particular words on particular occasions and much depends on evidence of what happened on particular occasions of oral communication. The appellants, in their notice of appeal, have framed grounds of appeal which, according to BOQ’s assessment, seek findings with respect to representations that do not correspond with the pleaded cases of the appellants. It will be necessary to return to this matter.

10. [17]

    The grounds of appeal concerning “pre-opening non-disclosure” concentrate on the allegation of statutory contravention by silence and the circumstance that BOQ did not disclose to the relevant franchisees allegedly pertinent information it had about the financial performance of other New South Wales franchisees.

11. [18]

    Not all grounds of appeal set out in the notice of appeal apply to all appellant franchisees and, in the course of submissions on the appeal, there was a further narrowing of scope. Nor, in the end, were all grounds of appeal pressed. The case ultimately advanced on appeal did not extend to the “approval letter statements”. The grounds of appeal pressed by the appellants were as follows:

Approach to the appeal

1. [19]

   The appeal has two aspects. The first concerns the alleged “target statements” and “break-even statements”. The central issue there goes to the content of representations made by BOQ personnel to the representatives of prospective franchisees and the quality of those representations in terms of the relevant legislation. There is, in general, no dispute as to the general import of what was represented. Nor is it disputed that successful pursuit of any cause of action under the Trade Practices Act (or Fair Trading Act) in respect of a “target statement” or “break-even statement” depends on a finding, first, that the statement was, in terms of s 51A(1) of the Trade Practices Act (or s 41 of the Fair Trading Act), a “representation with respect to any future matter” and, second, that BOQ did not have “reasonable grounds for making the representation” with BOQ carrying the burden of proving that, in making the representation, it had such reasonable grounds. If the s 51A (or s 41) elements are established, the statement in question is deemed to be misleading and the making of the statement is therefore prohibited by s 52 (s 42).

2. [20]

   The appellants’ challenge to the primary judge’s decision on the positive representations part of the case centres on his Honour’s view that the relevant statements were not representations “with respect to any future matter” but, rather, statements of hypothetical possibility. There is also a challenge to the primary judge’s approach concerning reliance and his view that, because prospective franchisees did not rely on the positive representations, those representations were not of the s 52 (or s 42) quality. The appellants say that the reliance question is irrelevant to characterisation of conduct and goes only to the question arising under s 82 (s 68) or s 87 (s 72) as to whether loss or damage was suffered “by” contravening conduct.

3. [21]

   The second aspect of the appeal – the “pre-opening non-disclosure” aspect – involves an examination of BOQ’s knowledge about the financial performance of existing New South Wales franchisees at the time immediately before particular OMBs were opened by appellant franchisees and whether BOQ’s failure to communicate that knowledge to franchisees about to open branches was itself misleading or deceptive conduct within s 52 (s 42). There are again issues about the primary judge’s approach to the reliance issue.

4. [22]

   The first aspect of the appeal turns substantially on evidence and findings about negotiations leading up to the making of each relevant franchise agreement, plus questions as to the characterisation of statements made. The second aspect involves examination of what BOQ knew at certain times and an assessment of the significance of its knowledge and its remaining silent while possessing the knowledge.

5. [23]

   Against that general background, I turn to factual matters.

The Zillman modelling

1. [24]

   Before embarking upon the program of expansion into New South Wales, BOQ conducted certain investigations. Market research was undertaken. In addition, Mr Zillman, a BOQ employee, prepared two financial models, one for a hypothetical metropolitan OMB and the other for a hypothetical regional OMB. There were two versions of each model – a “base case” and a “stretch” version.

2. [25]

   Mr Zillman’s work relied in part on known factors (such as BOQ’s commission structure for OMBs) and in part on assumptions. The assumptions went to matters such as the average level of deposits and lending an OMB would achieve each month, the types of loans and deposits that would be achieved, the average length of loans and deposits and the costs of establishing and operating an OMB.

3. [26]

   The initially assumed monthly loan level was $4.25 million for a metropolitan branch and $3 million for a regional branch. The $4.25 million figure was later adjusted to $4 million. Ms Quinn was a Group Executive of BOQ and the officer in charge of the interstate expansion project. She gave evidence of informal inquiries she had made of some of her banking contacts in New South Wales about the reliability of the initial $4.25 million figure for metropolitan business and the average deal size. Her inquiries were made principally of persons with whom she had worked during her previous employment by Westpac. Ms Quinn was of the opinion that the information she received supported the $4.25 million assumption. The informal inquiries were apparently the only basis for this. No similar work was undertaken in relation to regional branches and the primary judge found that it was “not clear” how OMB arrived at the $3 million figure.

4. [27]

   Ms Quinn also gave evidence about inquiries made as to the costs of rent and fit-out.

5. [28]

   Among Mr Zillman’s assumptions were assumptions as to the rate at which business would be generated. The model assumed that there would be a ramp-up period of 4 months, starting with a nil amount for month 1 and increasing to 100 per cent (that is $4.25 million) in month 4. Mr Zillman could not recall how the percentage of each monthly step was determined.

6. [29]

   The primary judge dealt at some length with the question whether Mr Zillman’s work provided to BOQ reasonable grounds for believing that, if a metropolitan OMB wrote $4 million per month in loans, that OMB would break even within a reasonable time. Mr Zillman’s model was examined in some detail. His Honour said that, in order to provide reasonable grounds, the model did not have to be perfect. It needed to be soundly constructed; and there was no dispute that it was. In addition, it needed to make reasonable assumptions. What amounted to a reasonable assumption in the particular context was seen by the primary judge as depending on the nature of the assumption, its significance to the model and how the assumption was treated. Where the assumption had a major effect on the model, it was obviously necessary to conduct some investigation concerning the reasonableness of the assumption. His Honour concluded that, on that approach, the assumption concerning $4.25 million in new lending per month used in the model as an example was one in respect of which BOQ did not have reasonable grounds. Where the assumption related to minor matters, such as minor expenses, a reasonable approach, his Honour said, may have been to make an estimate of the expense without conducting any investigations or, if the expense was small, to discount it all together. In some cases, where it was difficult to determine the reasonableness of an assumption, it may have been appropriate to consider alternative assumptions to determine how sensitive the model was to the assumption in question.

7. [30]

   The appellants criticised Mr Zillman’s model on various grounds. The primary judge found that there was substance in some of the criticisms but not in others. His overall conclusion was stated at [2055] in these terms:

Mr Allsopp and his standard practice

1. [31]

   The principal witness for BOQ was Mr Allsopp, Regional and Accreditation Manager NSW and ACT. He reported to Ms Quinn and was the main contact between BOQ and prospective franchisees. He had no specific recollection of any of the meetings at which he was alleged to have made relevant representations. As the primary judge said, that is not surprising since he dealt with some 1200 candidates over several years. Mr Allsopp did, however, give evidence of his general practice which involved, at an early stage, a meeting with a prospective franchisee.

2. [32]

   Mr Allsopp’s evidence was that events at the initial meeting were typically as follows:

3. [33]

   A prospective franchisee then set about preparing a business plan and cash flow using, for guidance, materials provided at the first meeting. Depending on circumstances, Mr Allsopp might have subsequent meetings with the interested persons.

4. [34]

   If the prospective franchisee returned the signed copy EOI letter, he or she was invited to meet Ms Quinn. This happened mainly at small cocktail gatherings at which up to 12 candidates were present. At those functions, Ms Quinn gave a short presentation about BOQ and the OMB model and usually spoke only briefly to individuals.

5. [35]

   It was Mr Allsopp who reviewed information provided by interested persons, including their business plans. Based on that information and the interview he had conducted, Mr Allsopp made a decision whether the candidature should be progressed. If his decision was positive, he recorded his approval of the applicant, the proposed site and other relevant matters. After completing his checklist, Mr Allsopp discussed it with Ms Quinn and, if she agreed with him, she counter-signed his recommendation.

6. [36]

   BOQ’s legal department then prepared a letter to the prospective franchisee. This was referred to by the primary judge as an “Approval Letter”. Like the EOI, it was in a standard form, although accommodating particular matters arising from Mr Allsopp’s appraisal of the particular case. The prospective franchisee was required to sign an acknowledgment that he or she had received and understood the letter and to return a copy to BOQ.

7. [37]

   At the next stage, Mr Allsopp completed a further checklist, “Checklist D”, and forwarded a package of documents to the legal department and the “OMB government department”. He also dealt with the credit department in relation to the applicant’s application for finance.

8. [38]

   The legal department then prepared a number of documents, referred to by the primary judge (at [64]) as the “OMB Documents”, as follows:

Particular findings about Mr Allsopp’s standard practice

1. [39]

   The primary judge recorded several findings about Mr Allsopp’s standard practice. He referred, at [1088], to Mr Allsopp’s evidence that he began a first meeting interview by referring to the appointment of the first owner manager 20 years earlier and providing a brief summary of BOQ’s history in Queensland and its background. He asked the candidate for their personal details and then asked the candidate to sign a confidentiality agreement. According to him, the meeting was based around the EOI Letter and that he read out substantial sections of the letter to each candidate.

2. [40]

   Mr Allsopp also gave evidence that he also referred to a checklist (“Checklist A”) to check that he had covered each topic on that list. He told the candidate how many OMBs were operating in Queensland and about the change from private agencies to OMBs. He also said that he stated that BOQ had been operating successfully in Queensland and that the OMB model had been successful; that BOQ was expanding into New South Wales and would like to be successful in that State as well. He said that he read out to candidates the responsibility for risk section of the EOI letter and that he explained that BOQ was “never going to be the best and never going to be the worst when it came to price”, and that the basis of the OMB model was that better service would be provided through OMBs than by competitor banks. This was because OMB franchiseess had a financial interest in the business and therefore an incentive to work hard.

3. [41]

   The modelling undertaken by Mr Zillman played a part in Mr Allsopp’s communications with prospective franchisees. In part of his evidence about his general practice at the first meeting (referred to by the primary judge at [1093]), Mr Allsopp stated that he told candidates that the Bank’s modelling indicated that an OMB would need to write $4 million in lending and take $2 million in deposits a month from the first month to be successful if their expenses were reasonable. He said to them that he did not know what their expenses and location would be so that, as part of the process, they would need to produce a cash flow. He said that candidates often did not ask further questions about that subject matter. He could not recall why he used the figure of $4 million when the checklist referred to a figure of $4.25 million. He said that he distinctly recalled that, in the context discussing the necessary level of business an OMB would need to write, he talked about expenses and pointed out that an OMB in Pitt Street would have higher expenses compared to an OMB in, for example, Campbelltown. He said, however, that the difference in expenses between New South Wales and Queensland never came up, although the primary judge found that he “promptly retreated from that evidence” and said that, if it had come up, he would have said that expenses in New South Wales would be higher than those in Queensland because costs in New South Wales were higher. He said that he told candidates that they would need to work out their own expenses. Mr Allsopp said that he talked to candidates generally about their ability to write $4 million of new loans per month. He denied that he expressed any view on how long it would take to start writing $4 million in loans after the OMB opened.

4. [42]

   His Honour stated (at [1141]) that he found “Mr Allsopp’s account of the approach he took to the first meeting he had with candidates to be plausible”. He continued (at [1142]):

The EOI letter

1. [43]

   The EOI letter was in a standard form into which the name and address of the particular prospective franchisee was written.

2. [44]

   At the beginning, the EOI letter pointed out that the franchisee retained responsibility and liability for the success and viability of the branch; also:

3. [45]

   A great number of subjects were then covered. Among the matters stated were the following:

The franchise disclosure document

1. [46]

   This document ran to more than 40 pages. Its purpose, as described on the front cover, was to convey “some of the information you need in order to make an informed decision about whether to enter into a franchise agreement with” BOQ. Other content of the front cover included the following:

2. [47]

   The disclosure document contained the names, addresses and contact details of existing OMBs. There was a statement that BOQ “encourages OMB agents to make inquiries with existing OMBs” and a warning that, because of geographical differences and the fact that some of the earlier appointments had been on different terms, comparison might be “difficult or impractical”.

The approval letter

1. [48]

   Successful applicants were sent an approval letter. It was in a fairly standard form but was altered to fit particular circumstances in some cases. The general nature of the relevant section of such letters may be understood by looking at four examples.

2. [49]

   The form used in relation to Traderight included the following under a heading “Sales Targets”:

3. [50]

   In the case of Rossmick, the corresponding section was in these terms:

4. [51]

   For JFS, the corresponding section read:

5. [52]

   In the case of Shamarbre, a slightly different form was used:

Credit department submissions

1. [53]

   The appellants also refer to the content of submissions made by prospective franchisees through Mr Allsopp to BOQ’s credit department in support of applications for loan funding to assist the establishment of the OMB and to provide working capital. Two such letters (one involving the Rossmick OMB at Maroubra and the other the Leokate OMB) contained the following statement:

The OMB agency agreement and the representations deed

1. [54]

   These were the documents by which negotiations were brought to a conclusion by appointment of the OMB franchisees as an agent of BOQ to conduct business for it.

2. [55]

   The representations deed contained a provision as follows:

3. [56]

   The OMB agency agreement contained a like clause:

The positive representations case – “target statements” and “break-even statements”

1. [57]

   It was virtually inevitable that the subject of likely or possible financial returns and performance should be discussed in the meeting or meetings Mr Allsopp had with each prospective franchisee. Likely or expected volumes of business were necessarily discussed. Each of the appellants, as a plaintiff, alleged particular representations by BOQ, through Mr Allsopp, on that matter. In each case, a representation referring to the writing of loans of an average of $4 million per month was alleged. It is uncontroversial that such a figure played a part in the Zillman modelling which was shared with potential franchisees. But the franchisees’ allegations concerning $4 million per month were by no means consistent or uniform.

2. [58]

   The franchisees also alleged statements by Mr Allsopp as to the point at which a business established by them would “break-even” in the sense of moving from an unprofitable introductory phase to ongoing viability.

3. [59]

   The representations allegedly made by Mr Allsopp as to financial performance are referred to as “target statements”. Those concerning transition from initial losses to profitable operation are referred to as “break-even statements”. There is a connection between the two in that expectations as to when “break-even” might be achieved were, of necessity, dependent on expectations about business volume and profitability.

4. [60]

   It is necessary to identify the particular allegations advanced by franchisees concerning “target statements” and “break-even statements”.

5. [61]

   Traderight, in its fifth further amended statement of claim, referred to a second meeting between its principals (Ms Smith and Mr Versace) and Mr Allsopp and made the following allegations:-

6. [62]

   BOQ denied each of those allegations.

7. [63]

   In the case of Rossmick, the third further amended statement of claim alleged representations by Mr Allsopp at the initial meeting with the Rossmick principals, as follows:

8. [64]

   Rossmick then alleged that, by the representations thus pleaded, BOQ:

9. [65]

   BOQ denied all these allegations (although, in relation to some, admitting that some of the words – excluding the $4 million reference – had been spoken).

10. [66]

    In the case of JFS, the fourth further amended statement of claim alleged representations by Mr Allsopp to the JFS Principals (Mr and Mrs Gardner) as follows:

11. [67]

    JFS further alleged, by reason of the statements thus alleged, BOQ had impliedly represented “that it did believe on reasonable grounds that an OMB branch could and would achieve $3,000,000 turnover within 3 to 6 months.

12. [68]

    BOQ denied all JFS’s allegations.

13. [69]

    Shamarbre does not pursue any appeal in relation to target statements. It does, however, challenge the judge’s decision (unfavourable to it) in relation to break-even statements.

14. [70]

    The particular representation was pleaded by Shamarbre as follows:

15. [71]

    BOQ denied this allegation.

16. [72]

    In the case of Geraghty & Palmer, the fifth further amended statement of claim alleged representation by Mr Allsop to Ms Geraghty and Mr Palmer at their first meeting, as follows:

17. [73]

    It was further alleged that, by those representations, BOQ impliedly represented “that it did believe on reasonable grounds that an OMB branch conducted by Geraghty and Palmer could and would achieve $4,000,000 loan turnover within 6 months”.

18. [74]

    It was alleged that, by its approval letter of 12 July 2005, BOQ noted its expectation that the OMB would write $4 million in lending drawdowns on a monthly basis in the initial 12 months period and, by that part of the letter, represented that the writing of $4 million in lending drawdowns per month in the initial 12 months was a reasonable expectation for the OMB and that reasonable grounds existed for having such an expectation.

19. [75]

    All the Geraghty & Palmer allegations were denied by BOQ.

20. [76]

    In the case of SME, the fourth further amended cross-claim alleged that, at their first meeting, Mr Allsopp made the following representations to Mr McCoy:

21. [77]

    These were said to entail an implied representation by BOQ that “it did believe on reasonable grounds that an OMB branch conducted by McCoy could and would achieve break even turnover within 6 to 8 months”.

22. [78]

    SME further alleged that BOQ, by its approval letter of 19 May 2005, noted an expectation that the OMB would write $4 million in loans and thereby represented that that was a reasonable expectation for the OMB and that reasonable grounds existed for the representation.

23. [79]

    BOQ denied the making of these representations.

24. [80]

    Leokate does not appeal in respect of target statements. It does, however, challenge the judge’s decision on break-even statements.

25. [81]

    In its fourth further amended statement of claim, Leokate alleged that, during the first and second meetings with the Leokate principals, Mr Allsopp made various representations, including the following:

26. [82]

    In the case of Best Deal, the third further amended statement of claim alleged that, at the first meeting with that company’s principal, Mr Jones, representations were made as follows by Mr Allsopp:

27. [83]

    Best Deal also pleaded:

28. [84]

    BOQ denied these allegations.

29. [85]

    In the case of LJH, it was alleged in the fourth further amended statement of claim that, at the initial meeting between Mr Allsopp and Mr Xu, the principal of LJH, Mr Allsopp made the following representations:

30. [86]

    It was further alleged that by the statement as to the expectation of writing $4 million in lending draw downs on a monthly basis, BOQ “represented in trade or commerce to Xu that it was a reasonable expectation for Xu’s OMB or that reasonable grounds existed for having such an expectation”.

31. [87]

    There was also an allegation that, by reason of the specific representations, BOQ “impliedly represented that it did believe on reasonable grounds that an OMB branch conducted by Xu could and would achieve $4,000,000 turnover within 4 to 5 months”.

32. [88]

    In the case of Southpole, the third further amended statement of claim alleged that at meetings attended by Southpole’s principal Mr Chowdhury, representations as follows were made by Mr Allsopp:

33. [89]

    It was further alleged that, by those representations, BOQ “impliedly represented that it did believe on reasonable grounds that an OMB branch conducted by Chowdhury could and would achieve $4,000,000 turnover within 6 months”.

34. [90]

    BOQ denied making the representations.

The positive representatons case – findings of the primary judge

1. [91]

   The positive representations on which the appellants rely (as to both “target” and “break-even”) were oral representations said to have been made by BOQ through Mr Allsopp at meetings with the principals of prospective franchisees. The primary judge concluded that those of the principals who gave evidence were not credible witnesses and that their evidence should not be accepted except to the extent that it was corroborated.

2. [92]

   The several principals recorded their recollections in affidavits. The primary judge referred to the possibility that, with the passage of time and after discussion with the principals of other plaintiff franchisees, witnesses may have come to embrace versions of relevant events that differed from the events that actually happened. His Honour did not thereby intend any criticism. He did no more than draw attention to the susceptibility of human memory to subsequent suggestion referred to by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315. At an early stage, therefore, the judge directed that the bulk of each witness’s evidence about oral statements be given orally. His Honour said in relation to that direction (at [49]):

3. [93]

   These observations were made before the judge embarked upon his consideration of each witness’s evidence. Particular assessments were then made in relation to the several witnesses. Thereafter, at [1148], the judge recorded a general finding that he did not accept the evidence given by the OMB parties concerning the representations allegedly made to them. Nor did his Honour accept that they relied on many of those representations. He continued (also at [1148]):

4. [94]

   The primary judge then referred to context, noting that, in many cases, the relevant representations were said to have been made by Mr Allsopp at the initial meeting. The purpose of that meeting was for Mr Allsopp to gather information as an initial part of an assessment process concerning candidates’ suitability.

5. [95]

   Another purpose of the meeting was to introduce the OMB concept to the applicants and to see whether they were interested. The appellants submitted before the primary judge that Mr Allsopp was likely to have been persuasive at such meetings because, as Mr Allsopp knew, BOQ had an aggressive target for its interstate expansion and he was himself paid a bonus for signing up franchisees. In the judge’s opinion, however, the appellants exaggerated the significance of those considerations. He did not accept that a desire to proceed with the interstate expansion as quickly as possible caused Mr Allsopp to say things that he did not believe at the time to be true. There was evidence that Mr Allsopp had received a modest bonus in a few cases. In the judge’s view, the prospects of receiving bonuses could not have weighed heavily on Mr Allsopp’s mind, added to which Mr Allsopp did not strike his Honour as someone who would deliberately mislead those who applied to become franchisees. Evidence about Mr Chapman’s plans for Hurstville and BOQ’s reservations about them was referred to by the judge as an indicator that BOQ did not pursue a plan of aggressive expansion.

6. [96]

   The nature of the first meeting as an introductory one was, in the judge’s mind, confirmed by the fact that interested persons could take material away to consider whether they were interested in pursuing the matter. Each of the applicants must have understood that that was the context of the meeting.

7. [97]

   His Honour paid particular attention to the fact that each prospective franchisee was given a copy of the EOI Letter and asked to sign an acknowledgement that they had read and understood the letter. The judge regarded that letter as important. He said that each of the applicants must have understood it in the same way. Many of the OMB witnesses gave evidence that they could not recall reading the letter or that they regarded it as a pro forma letter that they needed to sign in order to proceed. The judge regarded that evidence as implausible. It was, he said, ”implausible that the applicants would pay close regard to what Mr Allsopp said at an introductory meeting and ignore the letter that set out the basis on which they would become franchisees”, particularly since “Mr Allsopp took them through the letter at the initial meeting and they were required to and did sign an acknowledgment that they had read and understood it”.

8. [98]

   The judge placed considerable weight on the disclaimers in the EOI letter, given the context in which they appeared. He said (at [1154]):

9. [99]

   His Honour referred to the fact that Mr Allsopp made it clear, as did the EOI Letter, that each applicant would need to prepare a business plan as the next step in the process. The business plan was required to include a three-year cash flow forecast together with an outline of how the Owner Manager was going to attract business. The judge said, in that connection (at [1155]):

10. [100]

    His Honour said that a number of the appellants attempted to dismiss the business plan as “another formality that they had to go through in order to become a franchisee”. In general, he did not accept that evidence which he considered inherently implausible. His Honour continued (at [1156]:

11. [101]

    Central to the primary judge’s assessment of the statements made by Mr Allsopp to prospective franchisees was a distinction between what is hypothetically possible and a statement of what will (or may) occur. His Honour described the distinction in this way (at [1128]):

12. [102]

    The findings the primary judge made in relation to particular cases were as follows:

13. [103]

    His Honour noted (at [1269]) that, in relation to a $4 million figure, Mr Allsopp gave various accounts in cross-examination of what his practice was in dealing with prospective franchisees. In his affidavit, Mr Allsopp suggested that he mentioned the $4 million figure only if a candidate asked what level of lending an OMB would need to achieve. In cross-examination, however, he accepted that he raised that question. He says that it was his practice to say:

14. [104]

    The primary judge further noted Mr Allsopp’s evidence that he did not volunteer a view on whether he thought that $4 million in lending each month was achievable but that if a candidate asked he would say words to the effect of “You ought to be able to do $4 million worth of business a month”; also that Mr Allsopp had conceded that it was his expectation that a person opening an OMB in New South Wales would most likely be able to do $4 million a month because that was what he understood to be the industry expectation. However, he went on to say “I did emphasise for them to go and do – and some did produce budgets and cash flows not showing $4 million and they still had lower expenses.” Mr Allsopp denied that he ever said that the candidates’ business plan had to show $4 million per month in new lending. He pointed out that, in some cases, BOQ had accepted business plans that showed lower levels of lending than that.

15. [105]

    The primary judge found that Traderight’s pleaded allegations in relation to a $4 million figure centred on three alleged representations. The first was a representation that, in order for an applicant to be approved, BOQ required the business plan to forecast $4 million per month in lending draw downs. That representation depended on evidence given by Mr Versace. His Honour did not accept that evidence which was uncorroborated and struck him as inherently implausible. BOQ was, on occasions, prepared to approve business plans which showed an OMB writing less than $4 million in loans per month. A target of $4 million in new lending per month for a Sydney metropolitan OMB was referred to in later versions of the EOI letter, but not in the version given to Ms Smith and Mr Versace. His Honour accepted that it was likely that Mr Allsopp referred to the target when he was discussing that part of the letter which stated that the Bank would set sales targets. The Appointment Letter referred to a sales target of $4 million and Mr Allsopp must have known of that target. His Honour’s view was, however, that by referring to the target, Mr Allsopp was merely saying that Mr Versace and Ms Smith needed to satisfy themselves that they could achieve that level of business. Mr Versace did not use the $4 million in preparing the business plan. He used figures that were much higher.

16. [106]

    The second alleged representation in relation to $4 million (identified by the primary judge at [1271]) was a representation that, in order to break even, an OMB franchise would need to generate loan draw-downs to the extent of $4 million per month. The judge did not accept that Mr Allsopp made a representation in those terms. He considered it inherently improbable that he should have done so. Mr Allsopp himself pointed out in cross-examination that the required volume of business depended on the expenses of the branch and, on Mr Versace’s own cash flow projections and the assumptions he and Ms Smith had made in relation to their own expenses, $4 million would not have been enough. The judge observed in relation to this (at [1271]):

17. [107]

    The third alleged representation in relation to $4 million identified by the judge (at [1272]) was a representation that an OMB conducted by or on behalf of Ms Smith and Mr Versace would have no problem in reaching the target of $4 million in lending per month. His Honour accepted Mr Allsopp’s evidence that he did not volunteer an opinion on the likelihood of candidates meeting the $4 million figure and that he only dealt with the question if asked. It struck him as implausible that he would volunteer that information. The judge said that there was no evidence corroborating the evidence of Mr Versace and Ms Smith that such a representation was made; and, while Mr Allsopp accepted that it was not unusual for candidates to ask whether the $4 million figure was achievable, he did not accept that Mr Versace and Ms Smith asked that question. His Honour’s view was that their general approach to the investigation of the financial aspects of the franchise was so inadequate that the likelihood was that it did not occur to them to ask the question.

18. [108]

    It is relevant to quote in full what was said by the primary judge at [1273] in relation to the $4 million issue:

19. [109]

    As to reliance, the judge (at [1275]) did not accept that Mr Versace and Ms Smith could have relied on the turnover representation given that they were told repeatedly that they needed to undertake their own investigation. Dealing with the break-even statement allegation, the primary judge said (at [1276]):

20. [110]

    The break-even statement allegation was dealt with by the primary judge at an earlier point. He considered in in conjunction with an allegation concerning working capital. He held (at [1228]) that the fate of the break-even statement allegation was the same as that of an alleged representation to the effect that working capital of $50,000 to $70,000 would be needed for the first three to six months of operation “until the branch achieved break-even”.

21. [111]

    The judge held (at [1220]) that no such working capital representation was made. He held (at [1228]) that the allegation concerning break-even statements “must fail for the same reason”.

22. [112]

    At [1345], the primary judge found that it was likely that Mr Chapman had asked Mr Allsopp how much business a branch could write and that Mr Allsopp had said that an OMB based in Sydney ought to be able to write $4 million in loans per month, thus making what his Honour characterised as “a statement of opinion about what was hypothetically possible”, as distinct from “a statement about what a particular branch in an unknown location would or was likely to achieve”.

23. [113]

    At [1346], after referring to particular evidence of Mr Allsopp about conversations with Mr Bradley and Mr Chapman, the primary judge said:

24. [114]

    His Honour saw that assessment as warranted by subsequent evidence of Mr Allsopp to the effect that he had not told the persons in question that $4 million per was an achievable lending amount in relation to the conduct of an OMB and that what he had in fact said was that they should go ahead and do their own investigations and see what they believed they could do in the area in which they were going to set up their branch.

25. [115]

    The judge considered it inherently implausible (at [1347]) that Mr Allsopp should have told Mr Chapman what his cash flow should show. The purpose of the cash flow was to cause Mr Chapman to make his own assessment of what was achievable and what was necessary having regard to his projected expenses. Mr Chapman and Mr Bradley made inquiries about the amount of lending a branch would do each month. That would not have been done had Mr Allsopp simply told Mr Chapman what the cash flow forecast should contain. BOQ made it clear to Mr Chapman and Mr Bradley that it was their task to determine whether they thought that they would be able to achieve – or better – the figure Mr Allsopp regarded as an industry standard.

26. [116]

    Regarding break-even, the judge found (at [1351]) that the pleaded allegation concerning the break-even statement was a representation about the performance of a hypothetical OMB rather than what the particular OMB would achieve. It was therefore not a statement about a future matter but, at most, a statement of opinion concerning the possible or likely performance of a hypothetical OMB in Sydney.

27. [117]

    In any event, the judge found (at [1352]) that statements in the terms pleaded were not made. He relied, in part, on a file note of Mr Chapman referring to “break-even” for Queensland (not New South Wales) of 8 to 10 months.

28. [118]

    Dealing with JFS and the target statement question, the primary judge said (at [1485]):

29. [119]

    The judge’s finding (at [1491] – [1492]) concerning the break-even statement representation allegation advanced by JFS was as follows:

30. [120]

    There is no appeal in respect of target representations involving Shamarbre and there is no need to rehearse the findings on that subject. In relation to the break-even statement allegation made by Shamarbre, the finding (at [1547]) was as follows:

31. [121]

    The findings in relation to Geraghty & Palmer and the target statement allegation (at [1635]) were as follows:

32. [122]

    His Honour added (at [1638]) that Mr Allsopp may well have made the representation referred to in the fourth dot point at [72] above which was consistent with both his description of his practice and budgets set by BOQ. He continued (at [1638]):

33. [123]

    The judge’s finding concerning target statement was brief and was bound up with the finding concerning any working capital representation. The pleaded allegation (set out in the last dot point at [72] above) was in paragraph 41(s) of the fifth further amended statement of claim. The judge said (at [1640]:

34. [124]

    The target statement findings relevant to SME (at [1701]) were as follows:

35. [125]

    The finding concerning the break-even statement allegation appears at [1703] of the primary judge’s reasons:

36. [126]

    In the case of Leokate, there is no appeal concerning target statements and it is not necessary to refer to the judge’s findings on that matter. In relation to break-even, the relevant finding concerned paragraph 60(i) of Leokate’s pleading (set out at [81] above) and was stated by the primary judge at [1766]:

37. [127]

    In the case of Best Deal and the target statement allegation, the judge found (at [1839]) that it was likely that Mr Allsopp said something about the achievability of the target of $4 million in lending drawdowns on a monthly basis. Such a statement was consistent with the normal practice. The judge also said (at [1839]):

38. [128]

    The break-even statement allegation advanced by Best Deal (see [83] above) was in terms less explicit than those pleaded in other cases. The second of the allegations at [83], referring to six months, is very much tied to the proposition that $4 million lending drawdowns per month was the hallmark of viability. The judge’s finding (at [1850]) was as follows:

39. [129]

    In relation to target statements, the conclusions in relation to LJH (at [1902]) were similar to those in the case of Best Deal:

40. [130]

    The judge’s conclusions with respect to the break-even statement allegation made by LJH were stated at [1912] of his judgment:

41. [131]

    This fate of allegations about break-even statements proceeded from the judge’s earlier conclusions at [1907], as follows:

42. [132]

    In the case of Southpole, the primary judge found (at ([1974]) that a target statement in the particular terms pleaded was not made but that Mr Allsopp “may well have said” that the target set out in the EOI letter was achievable if the owner manager worked hard. His Honour continued (also at [1974]):

43. [133]

    The alleged break-even statement in the case of Southpole was that Mr Chowdhury could expect his OMB to achieve the lending target of $4 million per month within six months of opening if he worked hard (paragraph 36(c1) of the third further amended statement of claim, being the penultimate dot point at [88] above). The primary judge did not deal explicitly with that particular paragraph of the pleading. The appellants accept, however, that the conclusion with respect to it is to be gathered from [1976] of the judgment:

The positive representations case – hypothetical versus actual

1. [134]

   The appellants contend that the primary judge mischaracterised the relationship of the parties. BOQ, they say, was much better informed about the relevant business than aspiring franchisees were, especially at the negotiating stage. The appellants take particular issue with the following assessment at [1440] of his Honour’s judgment:

2. [135]

   It was wrong, the appellants say, to regard the relationship as one in which the prospective franchisees were expected to make and rely on their own inquiries and investigations; nor should the primary judge have seen the franchisor and prospective franchisee as treating on equal terms. They refer to Mackman v Stengold Pty Ltd [1991] ATPR 41-105 in which, as McHugh J noted in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 (at [120]-[121]), Spender J held that a corporation had contravened s 52 of the Trade Practices Act by supplying to a potential purchaser of a franchise business a report containing inaccurate figures concerning profit projections for the business. The corporation had supplied the report as if the figures had been prepared by its accountants, when in fact the accountants had simply accepted the figures supplied to them by the corporation and had represented the figures as their own. The report was to be used to persuade persons to purchase franchises. Spender J held that the corporation was liable although the report contained a disclaimer by the accountants.

3. [136]

   The appellants also point out that the information asymmetry and structural imbalance between prospective franchisor and prospective franchisee is sufficiently well recognised that it has received statutory and other regulatory recognition in Australia and elsewhere.

4. [137]

   The appellants do not say that s 52 of the Trade Practices Act and s 42 of the Fair Trading Act should be read beneficially for franchisees. What they do say is that the relationship necessarily informs the nature of the franchisor’s conduct as assessed objectively by the court.

5. [138]

   The appellants take issue with the primary judge’s finding that the statements in question were statements about a hypothetical franchise and what was hypothetically possible as distinct from representations with respect to the future financial performance of the particular OMBs. The appellants point, in particular, to the apparently standard content of the approval letter referred to at [49] to [52] above. They also refer to the submissions to the credit department (see [53] above).

6. [139]

   The appellants ask rhetorically why Mr Allsopp saw fit to mention a figure of $4 million or a break-even point of 8 to 12 months if those were merely speculation about what was hypothetically possible.

The positive representations case – characterisation of the statements

1. [140]

   The case before the primary judge was that the target statements and break-even statements made to each potential franchisee were, in terms of s 51A of the Trade Practices Act (or s 41 of the Fair Trading Act), representations “with respect to any future matter”, being the projected financial performance of the particular OMB. The issue was whether the representations were in truth of that character or merely descriptions of what was hypothetically indicated. The primary judge decided that the representations went only to the hypothetical.

2. [141]

   As I have said, the primary judge rejected the evidence of the several OMB principals as to what had been said by Mr Allsopp in the various meetings with him in which they had participated. His Honour stated cogent reasons for doing so. The apprehension that those persons had unconsciously reconstructed events as a result of discussions among them and perusal of one another’s written accounts was correctly regarded by the primary judge as a factor fatally compromising their credibility – added to which, of course, he had the opportunity to observe each in the witness box. There is no basis on which this Court can properly depart from the judge’s decision on these matters of credibility or reliability. The Court must deal with the matter on the basis of the evidence given by Mr Allsopp and other BOQ witnesses and, of course, contemporary documents in evidence.

3. [142]

   The primary judge made findings about research carried out by BOQ into the feasibility and desirability of expansion into New South Wales through OMBs. A report by a market research firm showed “a relatively substantial potential market”. However, that research did not indicate whether $4 million (or any other sum) in loans per month was likely. Nor did it indicate the volume of business required in order to cause an OMB to be viable or the point the point at which any newly established OMB would become viable in a break-even sense. The primary judge also referred to the fact that the assumptions underlying the Zillman modelling regarding average monthly lending by OMBs were based on informal inquiries made by Ms Quinn of some of her banking contacts in New South Wales (see [26] above).

4. [143]

   There was no firm foundation for any finding that BOQ was in any better position than a prospective franchisee to judge the potential or likely performance of New South Wales OMBs generally or of OMB operations in any given suburban or regional locality in New South Wales. BOQ had not operated in New South Wales. Ms Quinn gave evidence of having obtained what was, at best, anecdotal evidence about New South Wales conditions from contacts she had with persons in that State.

5. [144]

   The principals of the prospective franchisees were persons based in New South Wales who, for the most part, had banking experience. In particular:

6. [145]

   OMB principals who had no banking experience included Mr Versace and Ms Smith (Traderight), both of whom were practising solicitors. They told Mr Allsopp at an early stage that they were not intending to run the branch themselves. They brought in Mr Bridgman who had worked in the credit department of a large retailer. In soliciting business, Mr Versace and Ms Smith intended to make use of their contacts in the Sydney legal community. Mr Johnstone (Shamarbre) had had some experience with an investment bank in South Africa before coming to Australia and had thereafter two CEO positions in this country over some eight years.

7. [146]

   All the OMB principals were thus commercially sophisticated persons with business experience. Most had specific banking experience.

8. [147]

   The distinction the primary judge drew between a statement concerning what may occur in the future and a statement concerning what is hypothetically possible was explained in the passage at [1128] of the judgment set out at [101] above. Dealing with specific cases, the judge found that the terms in which particular representations were pleaded necessarily referred to a hypothetical OMB rather than the particular OMB to be established at a particular place by the person or persons to whom the representations were made. The message conveyed, in each case, was that the representation could not have been anything more than a statement of hypothetical possibility, as distinct from a statement of what a particular OMB was likely to achieve.

9. [148]

   His Honour’s characterisation was, in my opinion, correct. The ultimate source of any $4 million average monthly lending figure was the Zillman modelling. Mr Allsopp’s evidence was that he referred to modelling in his discussions with prospective franchisees. But the modelling, obviously enough, dealt with a hypothetical case and was based on a set of assumptions which might or might not, in whole or in part, match the actual circumstances in which a particular OMB was to be established and would operate. The prospective franchisees with whom the modelling was discussed could not have regarded the modelling and the indications extracted from it as anything other than hypothetical.

10. [149]

    A statement of opinion, including a prediction (such as a forward estimate relating to the financial performance of a business), may be a statement with respect to a future matter as contemplated by s 51A of the Trade Practices Act (or s 41 of the Fair Trading Act); and such a statement may well carry with it an implied representation that the person making it holds the opinion: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [33]. By sharing with prospective franchisees the results of the Zillman modelling and referring at different times to levels of business there indicated, BOQ was no doubt expressing or endorsing an opinion. But the opinion it expressed was not as to what a particular business established by particular persons in a particular locality could or would achieve. It was, at most and of its nature, an opinion to the effect that, if actual circumstances in a particular case precisely matched the Zillman assumptions, there was a statistically objective basis for a conclusion that particular financial consequences would likely follow. It was for that reason and in that sense that BOQ’s representations were in the realm of the hypothetical only.

11. [150]

    In the real world, of course, a great range of factors would contribute to the actual results achieved by any OMB. Location and the competitive environment in that location were obvious factors. An OMB in an affluent area could be expected to write more large loans (such as substantial housing loans) than one in an area with a significant population of people on welfare. An OMB that concentrated marketing efforts on solicitors with substantial conveyancing practices might be expected to secure more mortgage loan business than an OMB that did not. An OMB established in a suburb from which all established banks had withdrawn their branches might find it easier to attract certain kinds of in-branch custom that would be harder to achieve where other bank branches were operating. The banking and marketing experience and skills of an OMB’s operatives and the number of those operatives were other factors – likewise the effort brought to bear in establishing and building up the business, in soliciting custom and in capitalising on contacts with intermediaries such as finance brokers. And significantly, of course, BOQ was a new entrant into the New South Wales market in which a number of banks were well entrenched. The BOQ brand was not widely known. Many financial intermediaries and members of the public generally had established relationships that a BOQ branch was going to have to disrupt in order to obtain business.

12. [151]

    The environment in which BOQ treated with each prospective franchisee group emphasised the role of that group as independent entrepreneurs who were being armed by BOQ with the means of making money for themselves from commissions on the sale of established banking products carrying the BOQ brand. While, under the relevant agreements, BOQ had a right to insist on adherence to certain standards in the conduct of a particular business, it was for each franchisee to operate within those constraints in whatever way it chose. The effort expended and the business development initiatives undertaken were matters for decision by the franchisee. BOQ had no control over those matters and, in the end, simply could not know what quantity (or quality) of business a particular franchisee would achieve in any given period.

13. [152]

    There was, at any given time, however, some empirical information in the possession of BOQ. As the primary judge recorded at [2035], Ms Quinn and Mr Allsopp had made enquiries of other banks concerning the achievability of lending of $4 million (or more) per month and were told that the branches of which they enquired were exceeding $4 million per month. Also, BOQ knew from its own experience in Queensland that writing three to four home loans per week in that State was easily achievable. Average monthly lending of at least $4 million was thus indicated for established branches. But both BOQ and the OMB proprietors were setting sail for uncharted waters in New South Wales.

14. [153]

    Importantly, there were two Sydney suburban OMBs that did write an average of at least $4 million in loans per month after a start-up phase. They were the OMBs at North Parramatta and Punchbowl. The former wrote an average of more than $6 million per month in the year to August 2005 and more than $5 million per month in the following year. The Punchbowl branch wrote a monthly average of more than $5 million in the latter year. At trial, the appellants drew attention to factors said to set those OMBs apart in some way – for example, that North Parramatta had a particularly large number of lending officers, something that undermined meaningful comparison.

15. [154]

    This, in my opinion, serves to emphasise the reality to which the primary judge correctly pointed: that it was not sensible or indeed possible for someone in Mr Allsopp’s position to speak meaningfully of what a particular OMB in a particular location, operated according to future decisions made by particular proprietors in a particular local environment who had formulated a particular business plan, could or would achieve in terms of volume of business over any particular period. Mr Allsopp could refer to what the modelling showed and thereby have resort to what was, of its very nature, no more than hypothesis and must have been appreciated as such. And he could see, in the North Parramatta and Punchbowl cases, examples of reality corresponding with the hypothetical. But neither he nor anyone else within BOQ had any ready means of assessing whether the factual circumstances in which those OMBs operated bore any resemblance to the assumptions on which the modelling was based.

16. [155]

    It is true that, in the Approval Letter issued to each successful franchise applicant, BOQ included a statement such as the following:

17. [156]

    Inclusion of that statement cannot be taken as any form of representation by BOQ as to what could or would be achieved by the particular OMB. It was a statement as to what the bank expected. Each franchisee had, before that point, prepared a business plan. If, on the basis of that plan (or otherwise), the franchisee considered the expressed expectation of BOQ to be excessive or unrealistic, it was no doubt open to the franchisee to say so.

18. [157]

    It is also true that, in two of the submissions forwarded to BOQ’s credit department seeking financing approval for an OMB (see [53] above), it was said that “[b]oth parties believe that” the ”partnership” would be “in a position to write around $4m lending per month”. The “both parties” there referred to were, in each case, the members of the particular “partnership”, being Mr Chapman and Mr Bradley in the case of the Rossmick Maroubra OMB and Mr Sargent and Mrs Sargent in the case of the Leokote OMB. In forwarding a submission containing such a statement, Mr Allsopp was doing no more than informing the BOQ credit department of an assessment made by the prospective OMB proprietors. There was no statement of BOQ’s belief.

19. [158]

    The primary judge correctly held that the statements made by Mr Allsopp, as established by his evidence, were not, in terms of s 51A of the Trade Practices Act (and s 41 of the Fair Trading Act), representations “with respect to any future matter”, being the actual financial performance of a particular OMB. The challenge to that characterisation is, in my opinion, not sustainable.

The positive representations case - reliance

1. [159]

   The appellants challenge the primary judge’s findings that, if contrary to his Honour’s assessment (which I consider to be correct), the target statements and break-even statements were representations by BOQ with respect to a future matter, those statements were not caught by s 52 of the Trade Practices Act (or s 42 of the Fair Trading Act) because the appellants did not rely on them and accordingly were not misled or deceived. Such findings – framed as findings of lack of reliance by the appellants – were made by the primary judge at several points in his judgment.

2. [160]

   The appellants make two submissions in this part of their case: first, that the question whether the person to whom a particular representation was made was misled or deceived by the representation is irrelevant to whether the conduct consisting of the making of the representation is misleading or deceptive or calculated to mislead or deceive (the true issue being the objectively assessed capacity of the representation to produce a particular effect); and, second, that, in the particular statutory context, questions of reliance are properly addressed only upon inquiry whether, in terms of s 82 or s 87 of the Trade Practices Act (or s 68 or s 72 of the Fair Trading Act), a person to whom the prohibited representation was made suffered loss or damage “by” the conduct consisting of the making of the representation.

3. [161]

   These submissions may readily be accepted. Conduct is of the prohibited kind if “it has a tendency to lead into error”. These are words found in a number of decided cases and recently used by French CJ, Crennan, Bell and Keane JJ in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [39]. It is the quality of the conduct in terms of capacity or tendency, objectively ascertained, that must be judged, not its actual impact on a particular person. Where, as here (on the appellants’ case), the conduct consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the context in which the parties are situated, including such matters as their respective states of prior knowledge and understanding. It is within the whole of that context that the court must address the question whether the representation “has a tendency to lead into error” and make an objective assessment of its likely effect on rational decision-making by a person in the position of the representee. The question whether the representee relied or acted upon the representation is irrelevant to that inquiry. Only if monetary relief (or some other order) is sought by a plaintiff who alleges that a particular misrepresentation was made to him or her does that plaintiff need to establish a causal link between the impugned conduct and the loss that is claimed: see Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [37]. That need arises from the word “by” in the phrase “by conduct” in s 82 and s 87. Reliance is relevant to the causation question: see Henville v Walker [2001] HCA 52, 206 CLR 459.

4. [162]

   In short, a finding that the representee, in a one-on-one representation case, has not relied on the representation is immaterial to the question whether the making of the representation constitutes conduct within s 52 of the Trade Practices Act (or s 42 of the Fair Trading Act).

5. [163]

   To the extent that the primary judge proceeded on the basis that lack of reliance by a prospective franchisee on a particular statement made by Mr Allsopp was material to the question whether the making of that statement was conduct prohibited by s 52 (or s 42), his Honour acted on a misapprehension of the part that reliance plays in the statutory scheme. Since, however, his Honour was correct in his view that, apart altogether from any question of causation, BOQ’s conduct was not brought within s 52 (or s 42) by s 51A (or s 41), that misapprehension did not affect the correctness of his Honour’s ultimate finding against the OMB parties in relation to the target statements and the break-even statements.

Pre-opening non-disclosure – the appellants’ silence case

1. [164]

   I move now to the second aspect of the appeal concerning so-called “pre-opening non-disclosure”. A claim of that general description was pursued at trial by each appellant except Traderight. The claim, expressed in general terms, is that BOQ contravened s 52 (s 42) by failing to give the franchisee advance notice or warning of the poor financial performance that had been achieved by existing New South Wales franchisees in the period before the franchisee opened its OMB – in other words, that BOQ should have taken active steps to warn and failed to do so.

Pre-opening non-disclosure – findings of the primary judge

1. [165]

   The primary judge devoted his greatest attention in this part of the case to the claims made by the Rossmick companies. It is convenient to refer to the judge’s findings in relation to the several plaintiffs by which a pre-opening non-disclosure case (of statutory contravention by silence) was advanced.

2. [166]

   The Rossmick branches opened on 12 September 2005 (Hurstville) and 19 September 2005 (Maroubra). It was pleaded by Rossmick that, between 1 June 2005 and 19 September 2005, BOQ knew a number of facts, including that the great majority of the OMBs in New South Wales had never achieved an average of $4 million new lending per month, that a great majority of the franchisees had been unsuccessful in selling BOQ products to a level sufficient to break even or to be profitable, that a monthly lending target of $4 million was not easily achievable by a New South Wales OMB and that the great majority of those OMBs were not breaking even and were not profitable. Particulars were given of those somewhat broadly framed allegations.

3. [167]

   After setting out the various matters of which it alleged that BOQ was aware, Rossmick pleaded that, between 1 June 2005 (the earliest point at which BOQ was said to be aware of the relevant matters) and the date of the opening of each Rossmick branch, the Rossmick principals “had a reasonable expectation that [BOQ] would disclose to them” two classes of information: first, “information that was material to the likely financial performance of” the branch; and, second, “information that was material to the consideration by the plaintiffs whether or not to enter into” the agency agreement for the branch. This “reasonable expectation” was said to be entertained by the plaintiffs because of the various matters known to BOQ but not to the plaintiffs, being matters which, as BOQ knew, were material to decision making by the plaintiffs. The Rossmick plaintiffs did not say that they should have been informed of the relevant matters before entering into the franchise agreements. Their case was, rather, that they should have been informed before the branches opened, at which point they would have promptly terminated the franchise agreements and avoided the costs and other burdens of operating the OMBs until 30 June 2006 as they in fact did. Of course, if the “reasonable expectation” was, in any given case, that disclosure should be made before the franchise agreement was executed, failure to disclose at that earlier time would have been actionable.

4. [168]

   The primary judge began with an assumption that the Rossmick plaintiffs had established the matters particularised in this part of their case. Even on that assumption, in his Honour’s view, there was a question whether BOQ knew the pleaded facts which, he said, were “expressed at a high level of generality and involve assertions which contain a degree of judgment or carry with them connotations which, to some extent at least, involve something close to an expression of an opinion”. He gave an example. As at the start of August 2005 there were 13 OMBs open in New South Wales and nine of those had been open for more than six months. The number of suburban branches was smaller. His Honour wondered whether it could be said that the great majority of OMBs in the State had never achieved $4 million in new lending settlements per month where one out of 13 did so and when only nine OMBs had been open for more than 6 months; and whether “never” was a fair description of the position when the longest any branch had been open was 12 months.

5. [169]

   The appellants regard these observations as “remarkable”. What the judge was saying in a general way, in my view, is that, because only a very short history of New South Wales operations was available, the characterisation that the pleading sought to place on events was, at best, questionable. Since no branch had been open for more than 12 months and nine of 13 (which included non-suburban branches) had been open for more than six months – and, therefore, four had been open for six months or less – there was not a great deal of established performance against which comparisons could usefully be made. There is, to my mind, substance in that reservation.

6. [170]

   The judge went on to say that the matters pleaded by Rossmick were said by it to have been known to BOQ from selected facts which derived largely from financial information collated by BOQ itself. His Honour noted, however, that there was no evidence that BOQ actually performed the calculations from which the particularised facts were derived. He accepted that there must have come a time when it was apparent to BOQ that there was a serious problem with its interstate expansion, so that BOQ then had information that would be of interest to potential applicants concerning performance of other branches. But he considered it “difficult to say that that point had been reached at the time” the two Rossmick OMBs were opened.

7. [171]

   The primary judge did not express any concluded view on these matters because he thought that Rossmick’s non-disclosure case failed for the simple reason that it was not misleading for BOQ not to have disclosed the relevant facts. His Honour’s reasoning was as follows (at [1438] – [1441]):

8. [172]

   (Mr Chapman was one of the members of the group that applied for the Maroubra franchise ultimately awarded to Rossmick 2.)

9. [173]

   His Honour thus enunciated two conclusions. The first is that, to the extent that the case of contravention by silence was put on the basis that the plaintiffs were entitled to expect that positive but misleading or deceptive representations previously made would be corrected, the contravention so asserted was no more than a re-casting of the alleged contravention consisting of the making of the positive representations themselves. This is consistent with the analysis in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 at [23]. It was there pointed out that “reasonable expectation” analysis is unnecessary where the undisclosed fact is the falsity of a representation. That falsity itself is sufficient to found the claim of statutory misconduct. Secondly, the primary judge held that circumstances were not such as to give rise to an expectation that BOQ should, as to the matters said by the Rossmick plaintiffs to be material, have actively volunteered information to those plaintiffs rather then maintaining the silence that it in fact maintained. The silence was therefore not conduct prohibited by s 52 (s 42).

10. [174]

    The JFS branch opened on 19 December 2005. The pre-opening non-disclosure allegation in that case was substantially the same as in the Rossmick case, except that, since the branch was a regional branch the relevant average monthly lending figure was $3 million. The judge held (at [1510]) that the pre-opening non-disclosure claim should fail for the same reason as in the Rossmick case.

11. [175]

    The Shamarbre OMB opened on 21 December 2005. The pre-opening non-disclosure case and the judge’s treatment of it (at [1596]) were the same as in relation to Rossmick and JFS.

12. [176]

    The Geraghty & Palmer branch opened on 3 January 2006. The primary judge noted that the pre-opening non-disclosure allegation was the same as in the other proceedings but with some additional particulars said to have been known to BOQ in January 2006. His Honour recorded (at [1654]) a finding that BOQ “knew in January 2006 that most branches were not achieving budget for new lending”. Beyond that, he regarded the case as governed by the considerations he had already identified.

13. [177]

    The SME branch also opened on 3 January 2006. The primary judge (at [1732]) saw that case as governed by the same considerations as Geraghty & Palmer.

14. [178]

    Leokate’s branch was opened on 20 March 2006. The judge found (at [1802]) that, by that time, BOQ “knew that a substantial number of branches were not performing as expected” but, for the reasons he had given in relation to other cases, did not accept that BOQ was under an obligation to disclose that fact.

15. [179]

    The Best Deal branch was opened on 24 August 2006. By that time, the judge said (at [1871]), “BOQ was aware that there was a significant problem with its expansion into New South Wales” but it did not follow that that meant that the Bank engaged in misleading and deceptive conduct by failing to disclose to Mr Jones (or Best Deal) the facts that it pleaded were not disclosed.

16. [180]

    The LJH branch opened on 10 March 2007. The state of BOQ’s knowledge at that point was described by the primary judge in the terms he had used for Best Deal. His conclusion on the substantive question was also similarly expressed (at [1926]).

17. [181]

    Southpole’s branch opened on 23 April 2007. The primary judge said (at [2005]) that the pre-opening non-disclosure case was pleaded in the same way as in the other matter and that the same result applied.

18. [182]

    The appellants say that, in the context of the whole of the representations made by BOQ to prospective franchisees, the primary judge should have found that it was misleading for BOQ not to volunteer to each franchisee, before the opening of its OMB, the information BOQ had about the financial performance of existing OMBs in New South Wales. The appellants emphasise that this submission does not presuppose or depend on a conclusion that the target statements and break-even statements were themselves misleading. The point is that, in a context where those and other statements (even if only statements of what was hypothetically possible) had been made and possibilities as to levels of performance had been implanted in the minds of prospective franchisees, there arose an expectation that BOQ would communicate information coming into its possession which called into question the validity of the possibilities.

19. [183]

    BOQ’s response is that, when other elements of context are taken into account, no such expectation could reasonably have been entertained. BOQ points to a finding, in relation to Rossmick, that Mr Allsopp expressly said that no financial information about other OMBs could be given to the appellants. That position was made clear by the franchise disclosure document that each prospective franchisee received before entering into its agency agreement. The disclosure statement said, in unambiguous terms, in clause 17:

20. [184]

    Also, BOQ points to the primary judge’s finding that prospective franchisees were encouraged to make inquiries of existing franchisees and BOQ facilitated those inquiries by providing names and contact details so that a prospective franchisee could, if it wished, seek discussions with existing franchisees.

Pre-opening non-disclosure - principles

1. [185]

   The legal principles applicable to this part of the appeal are reasonably clear. A useful starting point is the decision of the Full Federal Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546, a case concerningthe sale and purchase of a restaurant business. At all material times, patrons at the restaurant premises were seen to occupy 120 dining chairs placed at 39 tables and eight stools placed at a bar. Before entering into the contract, the purchaser observed the business operating in that way. According to the relevant licence held by the proprietor, however, operations were restricted to a maximum of 84 diners at 26 tables and seating at the bar was not permitted. The vendor did not inform the purchaser of the limitations imposed by the licence. After learning of those limitations following completion, the purchaser alleged misleading or deceptive conduct of the vendor in the form of its failure to make the true position known to the purchaser.

2. [186]

   A finding crucial to the conclusion of the Full Federal Court that the vendor had, by its silence, contravened s 52 of the Trade Practices Act was stated by Lockhart J as follows (at 557):

3. [187]

   Those circumstances were regarded as giving rise to “a duty on the part of Henjo as vendor to reveal the true position to Collins Marrickville, the potential purchaser, before any contract was signed”, and it was “no answer” that the purchaser should have relied on its own inquiries.

4. [188]

   Reference should also be made to Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (above). In that case, a prospective borrower retained a broker to find loan finance for it. The broker located a lender and the loan was made. When the borrower defaulted and the lender suffered loss, the lender sought redress against the broker and, in so doing, relied on the Trade Practices Act in two alternative ways. Under one alternative, the lender maintained that the broker should have informed it that the insurance policy for which the funding was sought was of a particular type having what was, in the commercial context, an unattractive feature (that is, that it was non-cancellable), being a feature of which the lender was unaware.

5. [189]

   In advancing the alternative case based on failure to inform, the financier argued that, in the whole of the circumstances, it had a “reasonable expectation” that, if the policy was non-cancellable, the broker would alert it to that fact. The “reasonable expectation” test emerges from cases such as Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (above), Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 and Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; 104 FCR 564. As those and other authorities make clear, silence is itself a circumstance that must be assessed like any other and, unless the circumstances as a whole are such as to give rise to a reasonable expectation of disclosure of some relevant fact known to exist, there is no basis on which silence of itself can warrant an inference that the fact does not exist. As French CJ and Kiefel pointed out in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (at [19]):

6. [190]

   In assessing the quality and implications of silence and the conduct of a person that consists of remaining silent, all aspects of the objectively ascertained context will arise for consideration. Shared knowledge and assumptions – engendered, for example, by a course of dealing or a particular commercial setting or practice – of the person who remains silent and the person by whom the silence is experienced will be relevant, as will the separate knowledge of the latter.

7. [191]

   It was pointed out by French CJ and Kiefel J (at [21] – [22]) that s 52 does not strike at “the traditional secretiveness and obliquity of the bargaining process” and, in general, “does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party”. Even more so, their Honours said (at [22]), the section does not impose on a party “an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence”. In the result, all members of the High Court were of the opinion that, having regard to all the circumstances of the transaction, the financier could not have had a reasonable expectation that the broker would alert it to the particular quality of the insurance.

8. [192]

   A summary of relevant principles – extracted largely from Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd – appears in the following passage in the judgment of Sackville AJA in Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] (citations omitted):

9. [193]

   It may be accepted that, as was pointed out in CPI Group Ltd v Stora Enso Australia Pty Ltd [2007] FCAFC 160 (at [68](2)), it is no answer to a claim of misleading or deceptive conduct by silence to say that the person misled should have made his or her own enquiries and that, had they done so, it would have revealed the true position.

10. [194]

    Against that background, it is necessary to refer to certain factual matters.

Pre-opening non-disclosure – facts

1. [195]

   In relation to Mr Chapman (Rossmick – Hurstville), reference has already been made (at [171]) to the finding that, in response to an enquiry Mr Chapman made as to whether financial information was available, Mr Allsopp said that it was not and that this was because of privacy concerns; also that Mr Chapman could speak to any existing owner managers about their financial performance and that he would arrange meetings for Mr Chapman with any he wished to speak to.

2. [196]

   In the case of Mr Johnson (Shamarbre - Hornsby), the primary judge found (at [1534]) that he was told that he needed to make his own enquiries and that he was “able to, and did, make enquiries of other franchisees”. The judge referred (at [1596]) to Mr Johnson having spoken to owner managers at North Parramatta, Castlereagh Street Sydney and Dee Why, which were all of the metropolitan branches operating at the time.

3. [197]

   There was a finding at [1732] in relation to Mr McCoy (SME – Bondi Junction) that he understood that it was for him to make his own enquiries, that he did so and that he spoke to a number of owner managers.

4. [198]

   In relation to Mr and Mrs Sargent (Leokate – Miranda), the primary judge noted that each had spent time working at the Castlereagh Street OMB and that Mrs Sargent had also worked at the Menai, Kensington and Campbelltown branches. That being so, the judge found it “hard to believe that Mr and Mrs Sargent were unaware of how those branches were doing or at least unable to make enquiries about that matter if they thought it was significant”. Mr Sargent explained in evidence that he did not make enquiries because “I don’t inquire of people’s finances” because it is socially unacceptable to do so. The judge considered that explanation implausible, adding:

5. [199]

   In the case of Mr Jones (Best Deal – Toronto), there was an explicit finding at [1822] that he appreciated that he needed to make his own enquiries to determine whether a franchise operated by him would be successful; also (at [1850]) that he visited the Manly and Carlingford Court branches.

6. [200]

   Mr Xu (LJH – Hurstville), the judge said (at [1926]), was given an opportunity to be put in touch with other managers and in fact nominates several to whom he spoke.

7. [201]

   These are examples of findings to the general effect that the several prospective franchisees knew and understood that it was for them to make a business case for the establishment of a particular branch and, for that purpose, to make such enquiries as they thought fit, with BOQ facilitating contact with the owners of already operating OMBs if that were sought.

8. [202]

   Statements to prospective franchisees that they should make their own inquiries were consistent with the content of the EOI letter and the franchise disclosure document. They were also consistent with clause 5 of the representations deed which contained an acknowledgment by the franchisee and its principals that they had, in effect, made and relied on their own investigations.

Pre-opening non-disclosure – was there “reasonable expectation”?

1. [203]

   The crucial question is whether the course of dealing by BOQ with each prospective franchisee group before execution of the agency agreement (or opening of the branch) was such as to give rise to an objectively reasonable expectation on the part of each such group that BOQ should volunteer – that is, communicate spontaneously and without request – information that BOQ possessed about the actual financial performance of established OMBs in New South Wales, whether individually, as a group or on some kind of indicative average basis. As the authorities show, the answer to that question depends on the whole of the circumstances. Reference should be made to several aspects of those circumstances.

2. [204]

   In the first place, each prospective franchisee had chosen a particular suburb or town in which to establish a business and had prepared a business plan for that location. As has been seen, all OMB principals were persons of some commercial sophistication, all had business experience and most had specifically banking experience. Their sophistication and experience were to be deployed in establishing a business at a specifically chosen location from which the prospective franchisee aimed to make money by way of commissions paid to it by BOQ. Those commissions were geared to volumes of business transacted.

3. [205]

   Second, Mr Allsopp had made statements to the principals of the proposed OMBs about levels of future business which, on the assessment of the primary judge which I consider to be correct, were statements about what was hypothetically possible. They were nevertheless statements that impinged upon the consciousness of those persons and affected their thinking.

4. [206]

   Third, BOQ was in a contractual relationship with each of the franchisees who had previously established OMBs in New South Wales. There was a flow of information from each such established OMB operator to BOQ. One of the core functions of the agent prescribed by the agency agreement (clause 3.1(e)) was to “report Branch sales activity to the Bank”. BOQ therefore had, at any given time, knowledge about levels of activity achieved by pre-existing OMBs in the areas of business with which the statements of hypothetical possibility were concerned.

5. [207]

   Fourth, the principals of each prospective OMB were told by BOQ that it was for them to investigate the feasibility and viability of their business proposal. Documents given to them (particularly the EOI letter and the franchisee disclosure document) made it clear that BOQ could not give assurances or make predictions about revenue or profitability and that they should not only read all of their documents but also talk to other franchisees.

6. [208]

   Fifth, Mr Allsopp consistently told individuals who asked that it was for them to make their own inquiries about whether their proposed branch was likely to be successful and that BOQ would, if they wished, put them in touch with existing OMB proprietors.

7. [209]

   Sixth, several individuals did approach existing OMB proprietors with a view to obtaining information about levels of business and the like.

8. [210]

   Seventh, each prospective OMB operator’s proposal was a proposal to enter into competition not only with other banks but also with BOQ and other BOQ OMBs. The financial structure of a franchise was such as to make it desirable that an OMB try to obtain business that might otherwise go to a BOQ corporate branch or another OMB. This point requires some elaboration. An OMB established at, say, Bankstown would compete only in the broadest sense with a BOQ corporate branch or OMB operating at Townsville or in a suburb of Brisbane. A much more meaningful competitive interface would exist between, say, Southpole’s proposed new Bankstown OMB and the established OMB at nearby Punchbowl. The same interface would exist between a new Shamarbre OMB at Hornsby and the established OMB at Carlingford; or between Traderight’s new Castlereagh Street Sydney OMB and the established OMB at World Square Sydney. In each of those situations, the new OMB entrant would have an incentive to try to attract customers who were already dealing with the pre-existing OMB operating nearby, to seek to do business with customers of the nearby OMB and to deflect potential new customers away from that OMB and towards itself.

9. [211]

   In at least one case (Mr Chapman), Mr Allsopp was asked whether there was any financial information that he could give, and Mr Allsopp gave a negative answer because of privacy concerns, but said that Mr Chapman could speak to existing OMB managers about their financial performance and that meetings would be arranged with any to whom Mr Chapman wished to speak. That was a rational and expected response. In citing privacy concerns, Mr Allsopp was, in my view, recognising that specific information BOQ had from and about any pre-existing OMB was of a commercially confidential nature or, at least, might well be regarded by the proprietor of that OMB as being of that quality. Mr Allsop therefore did not regard himself as free to impart such information to a prospective OMB proprietor with whom negotiations were in progress. The franchise disclosure document stated quite clearly that BOQ did not provide earnings information about OMB agents and branches. The circumstance that the new OMB would or could be in competition with one or more existing OMBs is a factor that must have shaped Mr Allsopp’s unwillingness. But, of course, if the existing OMB proprietor, having received an approach direct from the prospective entrant at the instigation of BOQ, chose to give certain information, that was a matter entirely for that proprietor.

10. [212]

    Viewed as a whole, the context was one in which the positive statements made by BOQ as to what was hypothetically possible in terms of OMB business generation were made to commercially sophisticated persons with business experience to whom BOQ had made it clear, both orally and in writing, that it was for them to investigate the feasibility and viability of their own business proposal; that BOQ did not provide information about OMB earnings; that BOQ could not give assurances or make predictions about revenue or profitability; that they should talk to other franchisees; and that BOQ would facilitate introductions to other franchisees for that purpose. A particular aspect of the context was BOQ’s recognition of the commercial reality that information about financial performance received by it from existing franchisees was of a private or commercially sensitive nature so that, if it was to be disclosed by way of assistance to an intending new entrant, that disclosure should properly come from those existing franchisees who could safeguard their own interests (including competitive interests) by choosing what information to give and the form in which it should be given – and, of course, at the threshold, whether any information should be given at all. Furthermore, several prospective franchisees accepted the position presented by BOQ and made approaches to existing franchisees with a view to obtaining relevant information from them.

11. [213]

    With the context and circumstances configured in the way just described, the primary judge was, in my opinion, correct in his conclusion that there could have arisen no “reasonable expectation” on the part of prospective or recently signed-up franchisees that BOQ should take positive and unsolicited action to share with them information BOQ possessed about the financial performance and business levels achieved by existing franchisees, which information concerned the separate business operations of those existing franchisees and came to BOQ because of its contractual and business relationships with those parties. That conclusion was sufficient to cause the “pre-opening non-disclosure” case at first instance to fail.

Pre-opening non-disclosure – reliance

1. [214]

   The appellants say that the primary judge should not have treated what he found to be absence of reliance by franchisees as a factor relevant to the capacity of the pre-opening non-disclosure to mislead or deceive and, therefore, the quality of the conduct by silence.

2. [215]

   Since, on the view I take, the maintenance of silence about which the appellants complain did not, in any event, constitute conduct within s 52 (or s 42), that issue is of no direct relevance to the outcome on appeal. I would, however, confirm that, for the reasons I have given at [161] to [163] above, the question of reliance properly belongs to any inquiry into whether loss or damage was occasioned “by” prohibited conduct.

Conclusion

1. [216]

   The appellants have not established error in the conclusions of the primary judge that BOQ and other defendants did not, in relation to “target statements”, “break-even statements” or “pre-opening non-disclosure”, contravene s 52 of the Trade Practices Act or s 42 of the Fair Trading Act.

2. [217]

   The appeal should therefore be dismissed with costs.