Federal Court of Australia Husseini v Girchow Enterprises Pty Ltd [2024] FCAFC 143 Appeal from: Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420 Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500 File number: Judgment of: SARAH C DERRINGTON, STEWART AND FEUTRILL JJ Date of judgment: 12 November 2024 Catchwords: CONSUMER LAW – appeal from judgment where appellant found jointly and severally liable to pay damages under s 236 of the Australian Consumer Law – misleading and deceptive conduct under s 18 of the ACL – characterisation of conduct in context – misleading representations in Franchising Code of Conduct disclosure document – effect of disclaimers and qualifications – whether representations objectively misleading or deceptive or likely to mislead or deceive – whether representees subjectively misled or induced to enter into transactions – caution in accepting conclusionary and opportunistic evidence as to reliance – causation for the purposes of s 236 of the ACL Australian Consumer Law ss 4, 4(1), 4(2), 18, 18(1), 236, 236(1), Chs 2, 3, 4 Competition and Consumer Act 2010 (Cth) ss 51AE, 131, 139B, 139B(2), 139G, 140B, Sch 2; Ptt IVB, XIAA Legislation: Trade Practices Act 1974 (Cth) ss 51A, 82, 87 Competition and Consumer (Industry Codes – Franchising) Regulations 2014 (Cth) reg 4 Fair Trading Act 1987 (NSW) ss 18(1), 27, 28, 68 Fair Trading Act 2010 (WA) ss 18, 19 3Meg.Com Pty Ltd v TM & SM Pike Pty Ltd [2012] WASCA 128; 43 WAR 350 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; 221 CLR 568 Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45 Australian Securities and Investments Commission v Narain [2008] FCAFC 211; 169 FCR 211 Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 Campell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 Chappel v Hart [1998] HCA 55; 195 CLR 232 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 DL v The Queen [2018] HCA 26; 266 CLR 1 Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 Frigger v Trenfield (No 3) [2023] FCAFC 49 Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 167; 2 FCR 82 Gould v Vaggelas [1984] HCA 68; 157 CLR 215 Henville v Walker [2001] HCA 52; 206 CLR 459 Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 Cases cited: Jones v Dunkel [1959] HCA 8; 101 CLR 298 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 54; ATPR (Digest) 46-048 Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] AC 883 March v E & MH Stramare Pty Ltd [1991] HCA 12; 171 CLR 506 Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 Medlin v State Government Insurance Commission [1995] HCA 5; 182 CLR 1 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 Pico Holdings Inc v Voss [2004] VSC 263 Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131; 220 ALR 211 Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd [1993] FCA 192; 41 FCR 229 Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195 Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 Tomasetti v Brailey [2012] NSWCA 399 Travel Compensation Fund v Robert Tambree (t/as R Tambree & Assocs) [2005] HCA 69; 224 CLR 627 Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 Water Board v Moustakas [1988] HCA 12; 180 CLR 491 Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447 Yorke v Lucas [1985] HCA 65; 158 CLR 661 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Number of paragraphs: 255 Date of hearing: 27 February 2024 Counsel for the Appellant: Mr M Condon SC Solicitor for the Appellant: KDA Legal Pty Ltd Counsel for the First to Eighth Respondents: Dr A Greinke with Mr S Lamb Solicitor for the First to Eighth Respondents: Magnolia Legal Pty Ltd ORDERS NSD 551 of 2023 BETWEEN: SAMER HUSSEINI Appellant GIRCHOW ENTERPRISES PTY LTD First Respondent AND: KARIM GIRGIS Second Respondent SHERIF ELHAMY WADIE GIRGIS (and others named in the Schedule) Third Respondent order made by: SARAH C DERRINGTON, STEWART AND FEUTRILL JJ DATE OF ORDER: 12 NOVEMBER 2024 THE COURT ORDERS THAT: 1. The appeal be allowed and the orders of 12 May 2023 be varied such that: 1. paragraph 3 of the orders be: 'The first and second respondents pay $1,789,848.99 compensation to the first applicant, inclusive of interest to 12 May 2023'; 2. paragraph 6 of the orders be: 'The first and second respondents pay $1,955,996.29 compensation to the fifth applicant, inclusive of interest to 12 May 2023'; 3. paragraph 9 of the orders be: 'The first and second respondents pay $1,485,643.10 compensation to the eighth applicant, inclusive of interest to 12 May 2023'; 4. paragraph 14 of the orders be: 'The claims against the third and fourth respondents be dismissed'; and 5. paragraph 17 of the orders be: 'The first and second respondents pay the applicants' costs of and incidental to these proceedings, including the costs of the cross-claim but excluding the costs of the claims against the fourth respondent, and in the absence of an agreement to be taxed on a party and party basis up to 11:00am on 9 March 2020 and thereafter, on an indemnity basis'. 2. The parties' costs in the proceeding below, including the costs of the cross-claim, be reserved and, otherwise, the respondents pay the appellant's costs of the appeal to be taxed if not agreed. 3. Within 14 days of these orders: 1. the appellant file any agreed minute of proposed orders; or 2. the parties file and serve competing minutes of proposed orders together with short written submissions (not exceeding three pages) in support of the relevant party's minute of proposed orders, addressing the parties' costs in the proceeding below, including the costs of the cross-claim. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT SARAH C DERRINGTON J: 1. I agree with the reasons and orders of Feutrill J. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington. Associate: Dated: 12 November 2024 REASONS FOR JUDGMENT STEWART J: 1. I agree with the proposed orders and reasons of Feutrill J. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 12 November 2024 REASONS FOR JUDGMENT FEUTRILL J: Introduction 1. The appellant appeals from a judgment by which he, together with the ninth and tenth respondents, is jointly and severally liable to pay damages to the first, fifth and seventh respondents. The primary judge found that each of the appellant and the tenth respondent, as individuals, and through them the ninth respondent, as a corporation, had engaged in misleading conduct in contravention of s 18 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth), as principal wrongdoers. Further, that each of the wrongdoers was liable to compensate the first, fifth and seventh respondents under s 236 of the ACL for loss or damage the relevant respondents had suffered because of the contraventions. 2. The corporate wrongdoer was the sub-franchisor of the Ultimate Fighting Championship (UFC) Gymnasium franchise in Australia. The master franchisor was a company evidently incorporated in the United States of America. The primary judge found that the first to seventh respondents were induced by misleading conduct to enter into franchise agreements and guarantees with the sub-franchisor and to establish UFC Gyms at Balcatta in Western Australia and Blacktown and Castle Hill in New South Wales. The UFC Gym franchise businesses were financial failures, and the relevant respondents lost the entire value of the capital they had invested in the businesses and also incurred trading losses while unsuccessfully attempting to operate the businesses profitably. 3. The issues in the appeal concern the characterisation of conduct for the purposes of s 18 and the causation of loss or damage for the purposes of s 236 of the ACL. The tenth respondent engaged in the majority of the conduct that the primary judge found was misleading. The appellant's conduct was largely confined to signing, as director, a disclosure document that the franchisor was required to prepare and give to prospective franchisees under the Franchising Code of Conduct. The primary judge found that the disclosure documents contained misleading representations about the range of likely costs a prospective franchisee would incur when establishing a new UFC Gym franchise business. Those misleading representations contributed to inducing the relevant respondents to enter into the franchise agreements and guarantees that were financially disadvantageous to them. 4. Broadly, the issues in the appeal boil down to four questions to be answered with respect to the franchises established at the three separate locations. 5. Were misleading representations made by the appellant in the disclosure documents about the range of costs for establishing new franchise businesses? Here, the question relates to characterising statements about the range of establishment costs in the context of the document as a whole. That requires consideration of the source of the information in the disclosure documents, the effect of disclaimers and qualifications about the quality of the information in them and the extent to which the appellant made any statement referrable to the particular costs the relevant franchisee would incur at a particular location if a franchise business were established. 6. Were any misleading representations of the appellant, in context, conduct that was objectively misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL? Here, the question relates to the whole context in which the disclosure documents were given to the relevant respondents and includes the statements or representations of the tenth respondent and other agents of the ninth respondent (franchisor) that qualified or superseded statements made in the disclosure documents. 7. Were the relevant respondents subjectively misled and induced by the appellant's individual conduct in contravention of s 18(1) of the ACL to enter into the franchise agreements and guarantees? Here, the question relates to whether the appellant's conduct was any real inducement for the relevant respondents to enter into the franchise agreements and guarantees. The probability of the relevant respondents' inducement is to be considered in the context in which the disclosure documents were given to them, other statements or representations made to them about establishment costs and the likely profitability of the franchise businesses, the independent assumptions they made about establishment costs and profitability, the quality of the information in the disclosure documents, the primary source of the statements in the disclosure document, and the relevant respondents' experience and knowledge compared to the evident lack of experience and knowledge of the appellant. 8. Was misleading conduct relating to the likely costs of establishing the franchise businesses the legal cause of the loss or damage the relevant respondents suffered as a result of the failures, total loss and trading losses of the franchise businesses? Here, the question is whether the phrase 'because of' in s 236 of the ACL extends to all loss or damage that flowed from the relevant respondents' decisions to enter into the franchise agreements and guarantees or only a discrete part of that loss or damage; namely, loss or damage related to the difference between the actual and misrepresented estimated establishment costs. 9. The issues of characterisation and causation are largely questions of fact. The grounds of appeal do not assert that the primary judge made any error of law in the identification of the applicable legal principles, but they may indirectly raise error in the application of those principles in certain respects. Nonetheless, the issues and questions in the appeal can be determined by application of the well-established principles in an appeal of this nature. That is, it is an appeal by way of rehearing where the appellate power exists for the purpose of correction of error. In deciding the proper inferences to be drawn from the facts undisputed or otherwise found, the appeal court will give respect and weight to the conclusions of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. By so doing, the appeal court corrects error. Part of the process of review reflects that the trial judge enjoys certain advantages over the appeal court and while these do not derogate from the appeal court's duty to review, if the trial judge's conclusions are based in whole or in part upon a conclusion about the lack of credibility of a witness, to be reversed, those findings must be shown to be contrary to 'incontrovertible facts or uncontested testimony' or be shown to be 'glaringly improbable' or 'contrary to compelling inferences': see, Frigger v Trenfield (No 3) [2023] FCAFC 49 at [133]-[147] (Allsop CJ, Anderson and Feutrill JJ) and the authorities there cited. In the review of the asserted errors of the primary judge, I have had regard to and applied these principles. Background 1. For ease of reference and to avoid confusion, the parties are referred to in these reasons by their names and largely in the manner in which the primary judge described them in his reasons. 2. Ultimate Franchising Group Pty Ltd is the ninth respondent. UFG is the Australian franchisor of the UFC Gym franchise. UFG operates under a 'Master Territory Agreement' with the master franchisor, UFG Franchise Operations LLC, in the United States of America. UFG is now in liquidation and took no part in the appeal. 3. Mazen (Maz) Hagemrad was a director of UFG from 22 June 2016 to 10 December 2018. Samer (Sam) Husseini was also a director of UFG at all relevant times. Mr Husseini is the appellant. Mr Hagemrad is the tenth respondent in the appeal. Mr Hagemrad is now a bankrupt and took no part in the appeal. 4. Girchow Enterprises Pty Ltd, Karim Girgis, Sherif Girgis and Paul Chau are the first, second, third and fourth respondents in the appeal and are referred to collectively as the Balcatta parties. Girchow Enterprises made a franchise agreement with UFG. Mr K Girgis was a director of Girchow Enterprises. Each of Mr K Girgis, Mr S Girgis and Mr Chau had interests in the Girchow Enterprises. They also entered into guarantees as part of the Balcatta franchise agreement. Girchow Enterprises is referred to as the Balcatta franchisee. 5. Activ Health Clubs Pty Ltd and Richard Kim are the fifth and sixth respondents in the appeal and are referred to collectively as the Blacktown parties. Activ Health Clubs made a franchise agreement with UFG. Mr Kim is a director and shareholder of Activ Health Clubs. Thi Ahn Tuyet Le is also a shareholder of Activ Health Clubs. Mr Kim also entered into a guarantee as part of the Blacktown franchise agreement. Activ Health Clubs is referred to as the Blacktown franchisee. 6. Advanced Club Management Pty Ltd and Laziz Mirdjonov are the seventh and eighth respondents in the appeal and are referred to as the Castle Hill parties. Advanced Club Management made a franchise agreement with UFG. Mr Mirdjonov is the sole director and shareholder of Advanced Club Management and he entered into a guarantee as part of the Castle Hill franchise agreement. Advanced Club Management is referred to as the Castle Hill franchisee. 7. The majority of the conduct of which the Balcatta, Blacktown and Castle Hill parties complained was conduct of Mr Hagemrad. The impugned conduct of Mr Husseini was less prominent. Complaint was also made about the conduct of certain employees or agents of UFG. The conduct of all the individuals was attributed to UFG under s 139B of the CC Act. 8. Regarding the Balcatta parties, the primary judge found that Mr Husseini had made misleading representations relating to the estimated costs of establishing a franchise business by adopting, by his silence, express misleading representations Mr Hagemrad made during a presentation given at the Hyatt Hotel in Perth on 19 January 2016 and a Skype meeting on 13 April 2016. Those findings were not challenged in the appeal. The primary judge also found that Mr Husseini made a misleading representation during a tour of the Wetherill Park gym on 10 December 2016 to the effect that the costs of Life Fitness equipment (certain gym equipment to be used in the franchise business) were included in the cost estimate in a disclosure document that had been provided to the Balcatta parties when that was not correct. Mr Husseini challenges the finding that he made that representation. The findings about misleading representations made during the presentation, meeting and tour were of significance in that the representations contributed to the overall effect of the representations about the establishment costs for a new UFC Gym franchise and the Balcatta parties' understanding of what the likely establishment costs would be for the Balcatta franchisee. 9. Most significantly, the primary judge found that Mr Husseini had made misleading representations in the disclosure documents about what would be the likely range of costs to establish a new UFC Gym franchise business. The primary judge found that those representations were as to future matters and were misleading because there were not reasonable grounds for the representations. The primary judge found that the Balcatta, Blacktown and Castle Hill parties had relied on the misleading representations in the disclosure documents. Further, reliance on those representations, amongst other things, caused the Balcatta, Blacktown and Castle Hill parties to suffer loss or damage. Mr Husseini also challenges these findings in the appeal. Legislative Framework 1. As mentioned above, Sch 2 of the CC Act contains the Australian Consumer Law or ACL. 2. Section 18(1) of the ACL provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Section 236(1) of the ACL provides that if a person (the claimant) suffers loss or damage because of the contravention of another person and the conduct contravened s 18(1), the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. 3. Section 4 of the ACL provides: 4 Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation. 1. The Australian Consumer Law applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chs 2, 3 or 4 of the ACL, which includes s 18(1), by corporations: s 131 of the CC Act. Any conduct engaged in on behalf of a body corporate by a director, employee or agent of the body corporate within the actual or apparent authority of the director, employee or agent, is taken for the purposes of the ACL to have been engaged in also by the body corporate: s 139B(2) of the CC Act. 2. Except to the extent that an individual is involved in a corporation's contravention of s 18(1), and is thereby liable for a claimant's loss or damage under s 236(1), ACL s 18(1) as a law of the Commonwealth does not apply to conduct of a 'person' as an individual and non-corporation. Mr Husseini was found to have contravened s 18(1) as an individual and principal wrongdoer. He was not found liable as an accessory to (i.e., a person 'involved in') UFG's contravention. 3. Part XIAA of the CC Act facilitates the application of the ACL as a law of participating States and Territories. The applied Australian Consumer Law consists of Sch 2 of the CC Act and regulations made under s 139G: s 140B of the CC Act. Section 27 and s 28 of the Fair Trading Act 1987 (NSW) apply the ACL as a law of New South Wales (ACL (NSW)) and s 18 and s 19 of the Fair Trading Act 2010 (WA) apply the ACL as a law of Western Australia (ACL (WA)). 4. Although there was no focus on the issue before the primary judge or in the appeal, in point of law, it was s 236(1) of the ACL (WA) or ACL (NSW) that applied to any loss or damage the Balcatta parties suffered because of any contravention of s 18(1) of the ACL (WA) or ACL (NSW) by Mr Husseini. Section 236(1) of the ACL (NSW) applied to any loss or damage the Blacktown and Castle Hill parties suffered because of any contravention of s 18(1) of the ACL (NSW) by Mr Husseini. 5. While nothing in the appeal turns on the application of the ACL (WA) and ACL (NSW) to conduct of Mr Husseini, the application of the ACL as a law of a State is of significance in that it highlights that the liability of Mr Husseini must be established for causes of action of each of the Balcatta, Blacktown and Castle Hill parties against Mr Husseini as an individual and principal wrongdoer under State legislation. Further, the liability of Mr Husseini is for his individual conduct in contravention of s 18(1) and not his conduct, aggregated with the conduct of Mr Hagemrad and others, as the conduct attributed to UFG under s 139B of the CC Act for which UFG was found liable under s 18(1) of the ACL (Cth). The Primary Judge's Reasons The cases against Mr Husseini 1. The nature of the cause of action pleaded against Mr Husseini as an individual is not very clear from the statement of claim. The statement of claim does not identify with any particularity, or at all, the alleged conduct of Mr Husseini, as an individual, that it is alleged was misleading or deceptive or likely to mislead or deceive. Nor does it identify what alleged loss or damage each of the Balcatta parties, Blacktown parties and Castle Hill parties suffered because of Mr Husseini's alleged conduct. All the impugned conduct of Mr Husseini, Mr Hagemrad and UFG is pleaded in a rolled-up manner as the alleged 'Balcatta Representations', 'Blacktown Representations' and 'Castle Hill Representations'. 2. Regarding the Balcatta Representations, the only conduct of Mr Husseini upon which specific reliance was pleaded concerned the Hyatt presentation in January 2016 and the Skype meeting in April 2016: second further amended statement of claim paras [9]-[12], [29]. No reliance was pleaded in respect of Mr Husseini's conduct during the meeting at the Wetherill Park Gym in December 2016: second further amended statement of claim paras [24]-[25], [29]. In the case of the Blacktown Representations and Castle Hill Representations there is no specific conduct of Mr Husseini identified as forming part of those pleaded representations except for alleged involvement in the preparation of certain worksheets containing income forecasts: second further amended statement of claim paras [31], [33], [34], [36(e)], [36(f)], [36(g)], [37] and [39] (Blacktown); [41], [43], [44], [45], [47], [47A], [49(e)], [49(f)], [49(g)] and [50] (Castle Hill). 3. Regarding the disclosure documents, none of the Balcatta parties, Blacktown parties and Castle Hill parties alleged that Mr Husseini had made the representations in the disclosure documents or that they had relied on his conduct in signing those documents. In the statement of claim it is only alleged that: UFG sent the disclosure documents and draft franchise agreements containing the relevant representations to the parties; they relied on those representations to enter into the franchise agreements; the representations were representations as to future matters for which there were not reasonable grounds; the representations are taken to be misleading and, relevantly as to that aspect of the pleaded Balcatta Representations, Blacktown Representations and Castle Hill Representations, UFG engaged in conduct that was misleading or deceptive contrary to s 18 of the ACL; and the parties suffered loss or damage as a result of entering into the franchise agreements: second further amended statement of claim paras [16], [17(e)], [17(f)], [29], [35], [36(e)], [36(f)], [39], [48], [49(e)], [49(f)], [55]-[58], [61] and [62]. Consistently with the allegations in the statement of claim, insofar as it was alleged that representations contained in the disclosure documents were taken to be misleading, it is evident that Mr Husseini had not understood that any allegation was made against him in the second further amended statement of claim: defence paras [16(b)], [17(b)], [29], [35(b)], [36(b)], [39(a)], [48(b)], [49(b)], [56(a)]. That understanding was not contradicted in the reply. 4. Notwithstanding that it is not evident that a cause of action founded on Mr Husseini's conduct in signing the disclosure documents was pleaded against him, no ground of appeal asserts that the primary judge was in error for that reason. Further, it appears that the parties fought the case on the basis of a list of issues identified at trial and, in those circumstances, there is no evident unfairness to Mr Husseini: see, e.g., Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 496-497. Those issues evidently included, amongst other things, whether Mr Husseini had made the representations contained in the disclosure documents pleaded in the second further amended statement of claim at paras [17(e)], [17(f)], [36(e)], [36(f)], [49(e)], [49(f)]: J [7], [223], [418], [529]. 5. Nonetheless, the extent to which Mr Husseini's conduct and 'representations' were relied upon to ground a separate cause of action against him, as distinct from conduct that was attributed to UFG under s 139B of the CC Act, is not clear from the primary judge's reasons or his explanation of the list of issues the parties had agreed were to be determined at the trial. It is also not clear from the statement of claim. As no point has been taken in the appeal, I infer that the parties conducted the case before the primary judge on the basis that it was alleged that Mr Husseini had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in signing the disclosure documents. 6. The causes of action of the three claimant groups arose out of similar, but distinct, factual circumstances. For that reason they were joined in one proceeding, but, in point of detail, there were three substantive proceedings tried concurrently. As a consequence, there were a significant number of factual issues of some complexity and intricacy addressed and determined by the primary judge. Not all these matters are relevant to the appeal, but given the nature of the issues raised in the appeal, it is necessary to set out in some detail parts of the evidence and primary judge's findings which are germane to the grounds of appeal. Balcatta franchise 1. In early 2016 UFG, through Mr Hagemrad and Mr Husseini, began to promote the UFC Gym concept and franchise in Australia. Prior to UFG opening a UFC Gym in Wetherill Park in Sydney towards the end of 2016, there were no UFC Gym businesses and no UFC Gym franchise businesses operating in Australia. Hyatt presentation and Skype meeting 1. After the Master Territory Agreement was signed, UFG set up a website and invited anyone who might be interested in learning about becoming a franchise owner of a UFC gym in Australia to register. Invitations were sent for a presentation to be held at the Hyatt Regency Hotel in Perth on 19 January 2016: J [69]-[70]. 2. A presentation took place at the Hyatt on 19 January 2016. Mr Hagemrad and Mr Husseini were present. The formal part of the presentation was given by Mr Hagemrad. After the Balcatta parties showed some interest in becoming a UFC franchisee a Skype meeting was arranged and held on 13 April 2016. Mr K Girgis, Mr S Girgis, Mr Chau, Mr Hagemrad and Mr Husseini were present at that meeting. 3. The primary judge found that during the presentation held on 19 January 2016 Mr Hagemrad represented that a UFC Gym was likely to be able to be established for start-up costs in the range of $500,000 to $800,000 and, in context, those costs were intended and understood to include fit-out, all equipment, working capital and the franchise fee: J [235], [270(1)(a)]. The primary judge also accepted that Mr Hagemrad made, in effect, the same representation at the Skype meeting on 13 April 2016: J [237], [270(1)(b)]. 4. The primary judge found that these were representations with respect to future matters and they were taken to be misleading because evidence to the contrary, within the meaning of s 4(2) of the ACL, was not adduced to establish that there were reasonable grounds for making the representations. Further, Mr Husseini adopted Mr Hagemrad's representations by his conduct and his silence: J [322], [325]. The primary judge also said that, if had been necessary to do so, he would have concluded that there were not, in fact, reasonable grounds for the representations: J [323], [326]. Balcatta business plan and cashflow estimate 1. During June 2016 Mr Chau sent a draft business plan and cashflow estimate by email to Mr Hagemrad and Mr Husseini. A second Skype meeting was held to discuss these documents. After that meeting, Mr S Girgis sent an updated business plan and updated cashflow estimate by email to Mr Hagemrad and Mr Husseini. The cashflows included an interest expense based on an assumption of borrowing 50 per cent or $250,000 suggesting that Balcatta parties were using estimated establishment costs of $500,000 to inform their decision making at that time. The updated cashflow projected total revenue of $1,267,200 and total net trade receipts (after expenses) of $441,324 for the period November 2016 to April 2018: J [105]-[145]. 2. The estimated cashflows were based, in part, on assumptions that annual income would be $1,152,000 and gross profit would be $1,057,536. The Balcatta parties had alleged that Mr Hagemrad and Mr Husseini were the source of those estimates and had made representations to that effect. The primary judge found that Mr Hagemrad and Mr Husseini were not the source of those assumptions. As a consequence, the Balcatta parties failed to prove that Mr Hagemrad, Mr Husseini or UFG had made any representations about the future income of the Balcatta franchise business: J [225]-[230]. First Balcatta disclosure document 1. On 1 July 2016 UFG's solicitors provided the Balcatta parties' solicitors a disclosure document dated 31 March 2016 and a draft franchise agreement (first Balcatta disclosure document). The primary judge found that Mr Hagemrad prepared and Mr Husseini signed that disclosure document. Further, that both of them made the representations contained in it and, through them, UFG made those representations: J [87], [242]. While the disclosure document was dated 31 March 2016, in effect, the primary judge found that the representations in that document were made on 1 July 2016 when it was provided to the solicitors for the Balcatta parties: J [151], [333]. 2. The primary judge set out relevant parts of the first Balcatta disclosure document including Sch 5 (Tables 1 - 3 as well as a text box that preceded the tables and an important note that came after the tables): J [152]-[156], [159]-[162]. The parts relevant to the appeal are set out later in these reasons. For present purposes, it is sufficient to note that the document set out a range of establishment costs in Table 1 (items (a) to (f)) of Sch 5. The range of costs for item (b) (lease or purchase of equipment) was $250,000 to $350,000 and the range for item (c) (building, construction and fit-out) was $190,000 to $360,000 (approximately $300 per square metre). The primary judge characterised the statements in Table 1 as representations as to future matters and that they represented what the likely range of costs would be for lease or purchase of equipment and building, construction and fit-out to establish a UFC Gym franchise business: J [241], [270(2)(a)], [274]; J [249]-[250], [270(3)], [278]. 3. The primary judge said that none of the evidence upon which Mr Hagemrad, UFG or Mr Husseini relied as 'evidence to the contrary' for the purposes of s 4(2) of the ACL provided reasonable grounds for making the representations in the first Balcatta disclosure document about the equipment costs in the range of $250,000 to $350,000: J [327]-[331]. Therefore, the representations were taken to be misleading. It also appears that he would have found that, in fact, there were not reasonable grounds for that representation: J [332]-[333]. The primary judge also concluded that evidence to the contrary was not adduced concerning the lower and upper limits of the range of $190,000 to $360,000 given for building costs and, therefore, the representation was deemed to be misleading and deceptive. Further, he would have held that the Balcatta parties had established that there were not reasonable grounds for that representation: J [334]-[335]. 4. In the meantime, after 31 March 2016 (the date of the disclosure document) on 16 May 2016 and on 24 June 2016 Mr Hagemrad received information from Life Fitness, a potential supplier of gym equipment, that would have had an effect on the costs for leasing or purchasing equipment if Life Fitness equipment were used and whether the costs of that equipment were included in item (b) of Table 1: J [102]-[103], [146]-[150]. Life Fitness was later selected as the preferred supplier of the gym equipment. The extent to which item (b) of Table 1 included or excluded the Life Fitness equipment was a matter of controversy between the parties. The primary judge found that it was included: J [289]-[291]. 5. Further, the primary judge concluded that, as of 1 July 2016, Mr Hagemrad must have known that the amount shown in the range of expenditure for lease or purchase of equipment in the disclosure document was grossly understated because of the information he had received from Life Fitness on 16 May and 24 June 2016. He then said that there was 'no reason to think that Mr Husseini, who signed the First Disclosure Document, would not also have been aware that the amount was understated. He was presumably a member of "the board" with whom Mr Hagemrad says he discussed the figures': J [333]. These findings suggest that as of 1 July 2016 Mr Hagemrad and, probably Mr Husseini, knew that the range of costs for leasing or purchasing equipment represented in the first Balcatta disclosure document were inaccurate. The significance of these findings appears to have been that they contributed to the primary judge's conclusion that, as of 1 July 2016, there were not, in fact, reasonable grounds for the represented range of costs. Balcatta franchise deferred 1. After the Balcatta parties received the first Balcatta disclosure document and draft franchise agreement there was an exchange of emails with Mr Hagemrad in July 2016. These emails reveal that the Balcatta parties viewed the range of establishment costs in Table 1 of the first Balcatta disclosure document with scepticism and they requested additional information. On 12 July 2016 Mr Hagemrad sent an email in which he made further representations about the establishment costs. After that email was sent, the Balcatta parties responded indicating that they were putting the UFC franchise project on hold for a time: J [168]-[172]. 2. In September 2016 the Balcatta parties re-engaged with Mr Hagemrad and requested more current cost information based on UFG's experience with establishing the Wetherill Park Gym. On 23 September 2016 Mr Hagemrad sent an email in which he, again, made further representations about establishment costs: J [173]. 3. The primary judge found that Mr Hagemrad's representations in his emails of 12 July 2016 and 23 September 2016 were misleading because there were not reasonable grounds for the representations made in them about the establishment costs: J [347]-[348]. Wetherill Park Gym tour 1. UFG established a UFC Gym at Wetherill Park in Sydney during 2016. On 10 December 2016 Mr K Girgis and Mr S Girgis participated in a tour of that gym with Mr Hagemrad and Mr Husseini. There was a discussion during that tour between Mr K Girgis and Mr Husseini in which Mr K Girgis sought clarification about whether the Life Fitness equipment costs were included in the establishment costs that had been provided to the Balcatta parties. Separately, Mr K Girgis had a discussion with Mr Hagemrad about the same topic. There was conflicting evidence given about what was said during those discussions, but the primary judge preferred the evidence of Mr K Girgis and Mr S Girgis to that of Mr Husseini and Mr Hagemrad: J [243]-[248]. 2. In substance, the primary judge found that both Mr Husseini and Mr Hagemrad had represented that the range of equipment costs in item (b) of Table 1 of Sch 5 of the first Balcatta disclosure document included the Life Fitness equipment. The primary judge found the representations were correct insofar as they indicated that Table 1 of Sch 5 of the first Balcatta disclosure document included all equipment. But, they were misleading in the sense that, at that time (10 December 2016) the amounts could not have covered both the Life Fitness equipment and the other equipment that would be required: J [370]. Mr Hagemrad's last representations 1. The primary judge found that as a result of an email from Mr S Girgis to Mr Hagemrad dated 9 January 2017 and Mr Hagemrad's email in reply (copied to Mr Husseini) dated 10 January 2017, Mr Hagemrad represented that, in relation to the Wetherill Park Gym, the total 'start up' or 'fitout' costs (being all fit-out and all equipment) were $800,000 and those costs comprised: (1) the cost of weights, plates, and dumbbell, soft goods, UFC specific equipment including bag rack, Octagon and Everest was $200,000; and (2) the cost of fit-out, fixture, fittings, signage, branding etc was between $500,000 and $600,000. In context, that email represented that the Wetherill Park Gym costs were also likely to be the relevant costs for the Balcatta franchisee to set up a UFC franchise in premises of 1,000 square metres: J [262]-[263], [270(5)(d)]. 2. The primary judge concluded that there was evidence to the contrary that was not adduced concerning reasonable grounds for making the representation that the cost of fit-out, fixture, fittings, signage, branding etc was between $500,000 and $600,000. Therefore, Mr Hagemrad and UFG were taken not to have had reasonable grounds for making that representation and that representation was taken to be misleading. The primary judge was satisfied that there were not, in fact, reasonable grounds for making that representation: J [371]-[373]. Second Balcatta disclosure document 1. On 9 February 2017 UFG's solicitors sent the Balcatta parties' former solicitors a letter dated 9 February 2017, a disclosure document dated 31 October 2017 (second Balcatta disclosure document) and a second draft franchise agreement. On 15 February 2017 those documents were re-sent to the Balcatta parties' new solicitors and by Mr Hagemrad to the Balcatta parties: J [201]-[203]. As already mentioned, the franchise agreement was executed that day. The primary judge found that the second Balcatta disclosure document contained misleading representations as to future matters, but, in effect, that the Balcatta parties had not relied on that document because they had not read it before signing the franchise agreement and guarantees: J [219], [349]-[368]. Misleading conduct conclusion 1. The primary judge ultimately concluded: 374 I am satisfied, after considering the representations in respect of establishment costs made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL. Balcatta parties' reliance on representations 1. The primary judge concluded that at the time each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and guarantees, each of them thought that the Life Fitness equipment was included in Table 1 of Sch 5. That view was held because of what is stated in the first Balcatta disclosure document and that was consistent with communications between the parties up to 1 July 2017: J [274]-[277]. 2. The primary judge found that at least after the 10 January 2017 email, Mr K Girgis, Mr S Girgis and Mr Chau were operating on the basis that the fit-out costs were likely to be higher than represented in the first Balcatta disclosure document. At the time they each entered into the franchise agreement and guarantees '[they] are likely to have thought that the fit-out would be around a maximum of $600,000'. Further, 'each was making decisions on the basis that it was likely that the total cost of all fit-out and all equipment was likely to be around $800,000 and that 'understanding was contributed to by the terms of Table 1 of Sch 5 of the First Disclosure Document': J [280]-[281], [309]-[313]. 3. As to reliance on Mr Hagemrad's emails of 16 July 2016 and 23 September 2016, the primary judge concluded that the emails were relied on as part of a broadly consistent narrative about the level of establishment costs and equipment which led the Balcatta parties to hold a view at the time they entered into the franchise agreement and guarantees that the likely upper limit of establishment costs would be around $800,000: J [284]-[285]. 4. Due to the course of conduct that included, amongst other things, cashflows prepared and sent to Mr Hagemrad on 9 and 17 June 2016 and confirmation by Mr Hagemrad in emails on 30 January 2017 that these were in line with current expenses at the Wetherill Park Gym, Mr K Girgis, Mr S Girgis and Mr Chau did not understand from Mr Hagemrad's email of 10 January 2017 that the total amount of $800,000 did not include the Life Fitness equipment: J [286]-[308]. The primary judge then concluded that when each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees, each acted on the basis that the total cost of fit-out would be about $600,000. Further, that each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees because of the respondents' conduct, which included the making of each of the representations which he had earlier concluded were conveyed: J [309]-[314]. The primary judge then said: 315 In reaching these conclusions, I have taken into account the specific circumstances of each of Mr K Girgis, Mr S Girgis and Mr Chau and their differing levels of experience, referred to earlier. I have also taken into account their evidence, set out earlier, including in particular about reading the First Disclosure Document, in particular the "boxed" section in Schedule 5 and the "Important Note" at the end of that schedule. Blacktown franchise 1. There were a series of meetings and email communications between Mr Hagemrad, or another representative of UFG, and Mr Kim between September 2016 and January 2017. These culminated in Mr Kim executing a franchisee certificate on 20 January 2017 and franchise agreement on behalf of the Blacktown franchisee and personal guarantee on 14 March 2017. Cashflow document of October 2016 1. In an exchange of emails in October 2016, Mr Kim sent UFG a cashflow document and on 10 October 2016 Mr Jason Laurence (as representative of UFG) sent Mr Kim a revised version of that cashflow document. The primary judge found that in context, in providing the revised cashflow in the way that it did, UFG represented that gross annual revenue from membership fees for the Blacktown gym was likely to be in the order of $1,248,830, with membership growing at between 100 and 150 new members per month. It was represented that annual gross profit was likely to be in the order of $1,152,670 and that the net cash position was likely to be about $587,213 after 12 months. Also, Mr Laurence and Mr Hagemrad represented that there would be no or minimal cancellations of memberships in the first year: J [420]-[423]. 2. The primary judge found that these were representations as to future matters and were misleading: J [443]-[455]. Further, Mr Kim relied on the representations at the time that he entered into the franchise agreement and guarantee: J [428]-[433]. Meeting on 21 October 2016 1. At a meeting on 21 October 2016 Mr Hagemrad represented to Mr Kim that UFC gyms would able to be established for start-up costs of approximately $600,000 for gym premises of 800 to 1,200 square metres. Mr Kim did not rely on that representation when entering into the franchise agreement or guarantee: J [419], [439]. Blacktown disclosure document provided 1. In late December 2016 or early January 2017, Mr Kim received a draft franchise agreement and disclosure document (Blacktown disclosure document). The Blacktown disclosure document was dated 31 October 2016 and was in the same or substantially the same form as the second Balcatta disclosure document: J [410]. 2. The primary judge said that it was not in dispute that the disclosure document stated: J [424]-[425]: 3. at row (b) of Table 1 of Sch 5, that the costs for the 'lease or purchase of equipment' would be $300,000 to $500,000; and 4. at row (c) of Table 1 of Sch 5, that the establishment costs for 'building, construction and fit-out costs' would be $300,000 to $450,000. 5. The primary judge found that these were representations as to future matters and that they were misleading: J [443], [456]-[459], [350]-[358]. Further, that Mr Kim relied on those representations: J [434]-[438]. 6. Regarding the representation as to the equipment that was leased or purchased the primary judge said: 357 Evaluating the evidence given by Hagemrad as a whole, and in the context of the contemporaneous documents, I am not satisfied that there is "evidence to the contrary" within the meaning of s 4(2). It was not submitted that Mr Husseini – who signed the Second Disclosure Document – had adduced evidence to the contrary. His evidence was silent on the topic. 358 It follows that Mr Husseini, Mr Hagemrad and UFG are "taken not to have had reasonable grounds for making the representation" (s 4(2)) and that "the representation is taken … to be misleading": s 4(1). 359 If it had been necessary, I would have held that the applicants had established that there were not reasonable grounds for making the representation about the total cost for "lease or purchase of equipment", taking into account the matters just mentioned and the actual costs of equipment. The actual costs of equipment provide some evidence as to what was reasonably likely at the relevant time – see: Jazabas at [83]. To use Balcatta as an example, the actual costs on a GST exclusive basis for "lease or purchase of equipment", including Life Fitness equipment, far exceeded $500,000 exclusive of GST and included at least (but arguably more than): * Life Fitness $ 360,000.00 (approx) * UFC Equipment (gym) $ 222,112.60 * UFC Equipment (juice bar) $ 12,038.26 Total $ 594,150.86 360 In the absence of any real assistance from the parties on the issue, these amounts have been determined from a combination of Mr K Girgis's oral evidence about the Life Fitness equipment, the invoices in Mr K Girgis's first affidavit and Annexure 7 to the referee's report referred to at [596] below. Mr K Girgis confirmed that the invoiced amount of $411,323 was not what was ultimately paid and the amount was around $395,000 (inclusive of GST). 361 There was no reasonable basis for representing in the Second Disclosure Document that equipment could be as low as $300,000 (exclusive of GST). As Mr Hagemrad must have known, this was unlikely to have covered more than the Life Fitness equipment alone and was unlikely even to cover that. There were no reasonable grounds for suggesting that the likely upper limit was $500,000 (exclusive of GST). There may have been reasonable grounds for this amount being within the range of likely costs, but not for representing that it was the likely upper limit (see cl 14.5 of the Second Disclosure Document). In reaching these conclusions, I have sought to take hindsight bias into account – see: Jazabas at [83]. 1. Regarding the representation as to establishment costs for building, construction and fit-out, the primary judge said: 364 In my view, the evidence given did not amount to "evidence to the contrary" within s 4(2). All that was adduced was a series of quotations and invoices to which Mr Hagemrad said he had regard in some unidentified way at the time of making the representation. I should not be taken as accepting that Mr Hagemrad in fact had regard to the documents when making the representation. But, even accepting he did, the evidence does not permit any reliable conclusion as the facts and circumstances Mr Hagemrad actually relied on making the representation. 365 It follows that Mr Husseini, Mr Hagemrad and UFG are "taken not to have had reasonable grounds for making the representation" (s 4(2)) and that "the representation is taken … to be misleading": s 4(1). 366 If it had been necessary, I would have held that the Balcatta, Blacktown and Castle Hill applicants had established that there were not reasonable grounds for making the representation, taking into account the matters just mentioned and the actual costs of fit-out. On any reasonable view of what comprised fit-out – and noting for the Balcatta applicants they had been told that "fit-out" including such matters as flooring, AV, fittings, signage, branding and so on – the fit-out for each of the franchises significantly exceeded what had been represented to the franchisees. Mr Hagemrad managed all aspects of the fit-out for the franchisees: T448.12-27 (Mr Laurence); T489-490 (Mr Hagemrad). … Misleading conduct concerning the Blacktown parties 1. The primary judge ultimately concluded: 460 I am satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL. Blacktown parties' reliance on the representations 1. In terms of the primary judge's overall assessment of reliance, he said: 427 The question whether Mr Kim relied on the representations turns on all of the facts assessed in context. A part of the context is Mr Kim's experience in business, the documents he read before entering into the franchise agreement (which included the disclosure document, the franchise agreement and the franchise certificate) and the facts that he received advice from an accountant and business adviser. I have taken these matters into account. 1. The primary judge found that Mr Kim relied on the revised cashflow at the time he entered into the franchise agreement and guarantee to forecast likely income: J [433]. He also found that Mr Kim relied upon Sch 5 Table 1 items (b) and (c) of the Blacktown disclosure document as accurately reflecting the likely upper and lower limits of the total cost of equipment and the total cost of fit-out: J [437]. The primary judge found that Mr Kim had not relied on representations as to establishment costs that pre-dated the Blacktown disclosure document: J [439]. Castle Hill franchise 1. There were a series of meetings and communications between Mr Hagemrad and other representatives of UFG and Mr Mirdjonov. These took place between June 2017 and August 2017 and culminated with Mr Mirdjonov executing a franchisee certificate on 15 September 2017 and franchise agreement, on behalf of the Castle Hill franchisee, and a personal guarantee in September 2017. Meeting on 12 June 2017 1. On 12 June 2017 there was a meeting between Mr Hagemrad and Mr Price, as representatives of UFG, and Mr Mirdjonov. At that meeting Mr Hagemrad represented to Mr Mirdjonov that: J [461], [531]-[534], [536]: 2. the franchisor (UFG) had a proven business model that works in Australia; 3. the franchise breakeven point was approximately 600 to 700 members; and 4. existing UFC gyms that had opened in Australia were profitable. The primary judge found that these representations were misleading: J [575]-[580]. He also found that Mr Mirdjonov had relied upon them to enter into the franchise agreement and guarantee: J [565]. 1. At the same meeting, Mr Price (and UFG) represented at that meeting that franchises for UFC gyms would be able to be established for start-up costs of approximately $1,000,000 to $1,200,000 depending on the site: J [537]. The primary judge found that there were not reasonable grounds for making the representation (and, therefore, it was misleading). However, he found that Mr Mirdjonov had relied upon it to a minor degree and its causal contribution was minor: J [569], [589]. 2. On 12 June 2017 Mr Price sent Mr Mirdjonov an email attaching templates for a business plan and a 12-month cashflow. On 13 June 2017 Mr Laurence sent Mr Mirdjonov an email attaching a document that was said would help him in building his business plan. On 2 July 2017 Mr Mirdjonov sent an email to Mr Laurence posing a number of questions to assist him completing his business plan and Mr Laurence responded the same day. On 7 July 2017 Mr Mirdjonov sent Mr Laurence a financial model and business plan and requested Mr Laurence to review it and let Mr Mirdjonov know what Mr Laurence thought of it. Later that day Mr Mirdjonov sent an updated financial model. On 10 July 2017 Mr Mirdjonov sent Mr Price an email attaching what was described as a final draft business plan and profit and loss forecast: J [475]-[503]. 3. The primary judge found as a result of these exchanges of email correspondence and other conduct that Mr Hagemrad (and UFG) made the following representations to Mr Mirdjonov: J [540]-[547]. 4. Mr Hagemrad (and UFG) had represented that it was likely that gross income for the Castle Hill gym would grow from $79,825 on month one of opening to $120,736 by month 10. 5. Mr Hagemrad (and UFG) represented that it was likely that forecast total revenue for the first year would be $935,588 and that it would be $1,212,579 12 months after opening. 6. Mr Hagemrad (and UFG) represented that it was likely that membership would grow to 1272 members within 10 months of opening, growing by between 71 and 150 new members monthly, taking into account cancellations. 7. Membership was likely to continue to grow to about 1690 members by the end of 22 months. 8. Income of $1.83 million would be generated in the second year. The primary judge found that these representations were misleading: J [580]-[588]. Meeting on 20 July 2017 1. On 20 July 2017 there was a further meeting between Mr Hagemrad and Mr Mirdjonov. After that meeting Mr Mirdjonov sent an email to Mr Hagemrad and Mr Price attaching an updated business plan and profit and loss forecast: J [504]-[508]. The primary judge made no relevant findings about representations flowing from the meeting and email: J [548]-[551]. However, he found that these contributed to Mr Mirdjonov's reliance on the representations concerning income, membership and performance: J [566]-[568]. Castle Hill disclosure document provided 1. On 23 August 2017 Mr Mirdjonov received from UFG a draft franchise agreement and the Castle Hill disclosure document for a prospective franchisee. The Castle Hill disclosure document was dated 27 April 2017 and was signed by Mr Husseini: J [515]-[516]. The primary judge found that: J [552]-[553]: 2. by para (b) of Table 1 in Sch 5 of the Castle Hill disclosure document, Mr Husseini, Mr Hagemrad and UFG represented that the cost for the 'lease or purchase of equipment' was likely to be between $350,000 and $500,000; and 3. by para (c) of Table 1 in Sch 5 of the Castle Hill disclosure document, Mr Husseini, Mr Hagemrad and UFG represented that the amount for 'building, construction and fit-out costs' was likely to be between $400,000 and $650,000. 4. The primary judge found that these representations were misleading for the same reasons that he concluded that the second Balcatta disclosure document was misleading: J [590]-[593]. Misleading conduct concerning the Castle Hill parties 1. The primary judge ultimately concluded: 594 I am satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL. Reliance on Castle Hill representations 1. In terms of the primary judge's overall assessment of reliance, the primary judge said: 555 As with the [other] individuals, the question whether Mr Mirdjonov relied on the representations in entering into the franchise agreement and guarantee turns on all of the facts assessed in context, including his experience, the documents he read before entering into the franchise agreement – which included the disclosure document, the franchise agreement and the franchise certificate – and the advice he received. I have taken these matters into account in assessing reliance. 1. The primary judge found that in agreeing to enter into the franchise agreement and in guaranteeing the obligation of the franchisee, Mr Mirdjonov relied on the income, membership and performance representations that were conveyed through the financial model he prepared and Mr Hagemrad endorsed: J [565]. His Honour found that Mr Mirdjonov had not relied upon the representation concerning the cost for the lease or purchase of equipment: J [570]. However, his Honour found that Mr Mirdjonov had relied on Sch 5 Table 1 item (c) (building, construction and fit-out) that represented that establishment costs for building, construction and fit-out were likely to be between $400,000 to $650,000: J [571]. Observations about evidence and findings of reliance 1. The primary judge observed that the reliability of the evidence-in-chief of Mr Chau, Mr K Girgis and Mr S Girgis to the effect that they had relied on representations in the first Balcatta disclosure document was called into question and, in substance, was unreliable because their evidence was more-or-less in exactly the same terms as each other and as the evidence-in-chief of Mr Kim and Mr Mirdjonov: J [61]-[62]. The primary judge observed that it exposed the witnesses to an attack on their credibility 'if what had occurred was not so obvious': J [63]. What was obvious was that the affidavit evidence had been prepared by legal representatives in a formulaic manner. The primary judge, in effect, treated the statements in the affidavits with caution and placed more weight on the evidence given in cross-examination and contemporaneous documents: J [64]-[68]. 2. Regarding the primary judge's findings and conclusions, including the inferences drawn, about reliance, when dealing with the disclosure documents, the primary judge observed that in reaching his conclusions about reliance he had taken into account the 'boxed' section and 'Important Note' in Sch 5 of the disclosure documents: J [315], [427] (implicitly), [555] (implicitly). However, the reasons do not contain any detailed examination of the manner in which the qualifying text in Sch 5 was taken into account when reaching his conclusions that the claimant parties relied on the representations about the establishment costs in Table 1 of Sch 5. Otherwise, having regard to the lack of reliability of their evidence-in-chief, the reasons, as a whole, indicate that the primary judge's findings and conclusions about reliance, to which reference has been made earlier, were based on evidence given in cross-examination, contemporaneous documents and inference drawn from established facts. Therefore, generally, in an appeal by way of rehearing, this Court is in as good a position as the primary judge to draw such inferences about reliance. Damages 1. After concluding that the Balcatta, Blacktown and Castle Hill parties had relied upon misleading representations to enter into the franchise agreements and guarantees and that Mr Hagemrad, Mr Husseini and UFG had engaged in misleading conduct in contravention of s 18 of the ACL, the primary judge the dealt with loss, damage and other relief. 2. Insofar as loss or damage was concerned, the claimant parties had run their cases on the basis that, if the misleading or deceptive conduct had not occurred, they would not have executed the franchise agreements or guarantees and that their loss or damage was: 3. the sum of the costs incurred setting up the franchises, the borrowing costs incurred and net operating losses incurred in running the franchises; less 4. the residual value of the franchise businesses: J [597]. 5. The primary judge, in effect, accepted that was the appropriate way to calculate the claimant parties' loss or damage. The amounts in (a) and (b) were set out in reports of a referee which the primary judge adopted and used as the basis for determining the loss or damage of the claimant parties. Further, for the purpose of determining the residual value of the businesses, the primary judge considered that 31 December 2022 was the appropriate date at which to value the business: J [598]-[619]. The primary judge then assessed the respective claimant parties' loss or damage by reference to and adopting the conclusions in the referee's reports except as to the net operating losses with respect to the Castle Hill franchise. As to the net operating losses of the Castle Hill franchise, that was referred to the referee for further assessment: J [635]-[660]. 6. Underpinning the primary judge's assessment of loss or damage was a finding that upon entering into the franchise agreements and guarantees, the claimant parties 'were locked into arrangements with the franchisors and into an endeavour to operate a business concept which had just been introduced into the Australian market'. Further, that the operating losses incurred running the business were incurred 'because of' the conduct of Mr Hagemrad, Mr Husseini and UFG. There was no loss separate to that occasioned because of the conduct in contravention of s 18(1) of the ACL: J [618]. The primary judge found that the claimant parties had suffered loss or damage because they had expended money on setting up businesses that had no value as a going concern. The businesses had no value because they did not and were unlikely to ever generate a profit: J [610]-[611]. 7. Put another way, the primary judge accepted the claimant parties' approach to assessment of their respective loss or damage because he accepted, in effect, that the failure of the franchise businesses (the negligible value of them) was 'because of' the misleading or deceptive conduct of Mr Hagemrad, Mr Husseini and UFG. The negligible value of the franchise businesses meant that the claimant parties, in substance, received no value for the costs incurred establishing the businesses, were not able to recover borrowing costs on those establishment costs and made operating losses running the franchise businesses. Grounds of Appeal 1. In the second further amended notice of appeal there are nine grounds of appeal concerning the Balcatta franchise, six concerning the Blacktown franchise and seven concerning the Castle Hill franchise. Damages 1. In the case of the Balcatta franchise, Blacktown franchise, and Castle Hill franchise, two grounds concerned damages which, in effect, raise the same points and are common. 2. In the end, the ground advanced was to the effect that the primary judge was in error in assessing the claimant parties' loss or damage by reference to the value of the franchise businesses as of 31 December 2022. In substance, Mr Husseini contends that his impugned conduct relates to the estimated establishment costs of the franchise businesses. The claimant parties failed to establish that they suffered loss or damage because of any prejudice resulting from them being misled about the establishment costs. The claimant parties suffered loss or damage because the franchise businesses were not profitable. The profitability of the businesses was unrelated to the establishment costs. 3. As the grounds concerning loss or damage are essentially common, it is convenient to deal with those grounds separately from the other grounds. Further, for the reasons given later, it is not necessary to deal with these grounds of appeal at all because I have concluded that Mr Husseini should succeed on the grounds of appeal concerning characterisation of and reliance on his individual conduct. Balcatta franchise 1. The remaining seven grounds concerning the Balcatta franchise fall into four groups of issues and Mr Husseini's grounds and contentions may be summarised as follows. 2. Balcatta Issue 1: Grounds A.3.f and A.4, A.5 and A.6 concern the findings that the primary judge made about Mr Husseini's conduct during the Wetherill Park Gym tour on 10 December 2016. Mr Husseini contends that the primary judge was in error for concluding that the fit-out costs in the disclosure document did not include the Life Fitness equipment. The primary judge should have found that Mr Husseini informed a representative of the Balcatta parties that the estimate for fit-out costs did not include the Life Fitness equipment, alternatively, he should have found that Mr Husseini's statement was not misleading because it was qualified with a statement to the effect that the Balcatta parties should check with Mr Hagemrad. 3. Balcatta Issue 2: Grounds A.1 to A.3, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the first Balcatta disclosure document. Mr Husseini contends that: 4. the first Balcatta disclosure document contained qualifications and disclaimers (the Sch 5 text box and important note): A.3.a; and 5. in the context of those qualifications and disclaimers and: 1. the representations Mr Hagemrad made in his emails of 16 July 2016 and January 2017 about estimated establishment costs: A.3.b, A.3.g, A.3.h; 2. the finding the primary judge should have made about Mr Husseini's statements on 10 December 2016: A.3.f; 3. the contents of the second Balcatta disclosure document (which contained significantly higher cost estimates): A.3.k; and 4. that Mr Husseini made no representations concerning establishment costs after 1 July 2016: A.3.j, Mr Husseini's conduct was not misleading or deceptive or likely to mislead or deceive. 1. Balcatta Issue 3: Grounds A.1 to A.3 also, in substance, assert that the primary judge was in error in concluding that the Balcatta parties relied on the representations made on 19 January and 13 April 2016 and the representations about establishment costs in the first Balcatta disclosure document. Mr Husseini contends that the primary judge ought to have disregarded the Balcatta parties' evidence-in-chief about reliance because it was not credible as the statements of all claimant parties were more-or-less the same and were 'cut and pasted' from the written evidence of one of the other parties. Mr Husseini contends, in substance, that it was not open to the primary judge to infer from the evidence and other findings that he had made that the Balcatta parties had relied on the representations made on 19 January and 13 April 2016 or in the first Balcatta disclosure document. 2. Mr Husseini contends it was not so open: 3. for the same reasons that he contends that the representations in the first Balcatta disclosure document, in context, was not objectively misleading conduct: A.3.a, A.3.b, A.3.f, A.3.g, A.3.h, A.3.j and A.3.k; 4. because the Balcatta parties did not believe that the cost estimates were accurate and undertook their own due diligence between July and September 2016: A.3.b, A.3.c and A.3.g; 5. because the results of the Balcatta parties' due diligence were not disclosed in evidence and it should be inferred that they failed to do so because they feared to do so: A.3.d; 6. because, at the time of execution of the Balcatta franchise agreement and guarantees, the Balcatta parties: 1. were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): A.3.e; 2. had been given a higher estimate of establishment costs than those stated in the first disclosure document by Mr Hagemrad: A.3.g and A.3.h; 3. had been provided with the second Balcatta disclosure document that contained higher estimates: A.3.k; and 4. would not have entered into the franchise agreement if they had known of the cost estimate in the second disclosure document: A.3.l; and 5. knew that the estimated figure for establishment costs was greater than the estimate in the first disclosure document: A.3.i. 7. Balcatta Issue 4: Grounds A.3.n and A.3A contend, in substance, for the same reasons that it was not open to infer reliance, the primary judge failed to give reasons or adequate reasons for his conclusion that the Balcatta parties had relied upon the misleading representations made on 19 January and 13 April 2016 and in the first Balcatta disclosure documents relating to the establishment costs of a franchise business. Mr Husseini contends that the reference to these matters at J [314] is inadequate to explain 'how' the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document. Blacktown franchise 1. The four grounds other than damages for the Blacktown parties fall into three groups of issues that are similar to the last three Balcatta issues. 2. Blacktown Issue 1: Grounds B.1 to B.2, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the second Balcatta disclosure document which is also the Blacktown disclosure document. As with the Balcatta parties, Mr Husseini contends that the Blacktown disclosure document contained disclaimers and qualifications and, in that context, his conduct was not misleading or deceptive or likely to mislead or deceive: B.2.a. 3. Blacktown Issue 2: Grounds B.1 to B.3, in substance, assert that the primary judge was in error in concluding that the Blacktown parties relied on representations in the Blacktown disclosure document relating to the establishment costs of a franchise business. For the same reasons as for the Balcatta parties, Mr Husseini contends the primary judge should have disregarded the Blacktown parties' evidence-in-chief about reliance: B.3.a and B.3.b. Further, it was not open to the primary judge to infer reliance based on the evidence and other findings. It was not so open because: 4. at the time of execution of the Balcatta franchise agreement and guarantees, the Balcatta parties were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): B.2.b; 5. the Blacktown parties had not demonstrated that the nature of the costs actually incurred at the location actually used in establishing the Blacktown franchise business were consistent with the assumed nature of the estimated costs in the disclosure document: B.2.e; 6. the Blacktown parties obtained accounting and business advice before entering into the franchise agreement and guarantee upon which they had relied: B.2.c; 7. the Blacktown parties failed to give evidence of the accounting and business advice they obtained and the primary judge should have inferred that failure was because they feared to do so: B.3.c; and 8. the Blacktown parties admitted they had relied on information provided to them by Mr Hagemrad and Mr Laurence: B.2.d. 9. Blacktown Issue 3: Ground 3A asserts, in substance, for the same reasons that the primary judge was in error for concluding that there was reliance, he failed to give adequate reasons for concluding that the Blacktown parties relied on the representations contained in the Blacktown disclosure document relating to the establishment costs of a franchise business. Mr Husseini contends that the reference to these matters at J [427] is inadequate to explain 'how' the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document. Castle Hill franchise 1. The issues raised in the five grounds other than damages for the Castle Hill parties fall into four groups. 2. Castle Hill Issue 1: Grounds C.1 to C.3, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the Castle Hill disclosure document. Mr Husseini contends that, in context, the representations in the disclosure document were not misleading. The context was that, in July 2017, before the Castle Hill parties were provided with the disclosure document, UFG informed the Castle Hill parties that the total establishment costs would exceed $1.5 million which was significantly higher than the estimates in the disclosure document: C.2.a.i. 3. Castle Hill Issue 2: Grounds C.1 to C.3, in substance, also assert that the primary judge was in error in concluding that the Castle Hill parties relied on the representations in the disclosure document relating to establishment costs and he should have found that the Castle Hill parties could not reasonably have relied on those representations based on the context and evidence. That context and evidence was: 4. UFG had informed the Castle Hill parties that the total establishment costs would exceed $1.5 million: C.2.a.i; 5. the Castle Hill parties had estimated that the establishment costs would be in excess of $1.5 million: C.2.a.ii; 6. the Castle Hill parties understood that the actual establishment costs could be around $100,000 greater than the $1.2 million represented in the disclosure document: C.2.a.iii; 7. the actual establishment costs the Castle Hill parties incurred was less than $1.5 million and close to the $1.2 million represented in the disclosure document: C.2.b and C.2.c; 8. the primary judge found that the Castle Hill parties had not relied on the equipment costs represented in the disclosure document because: 1. they knew that the equipment costs represented in the disclosure document were less than the estimates provided in July 2017: C.3.a.i; and 2. they relied on the detailed financial model in relation to the cost of equipment rather than the representations in the disclosure document: C.3.a.ii; 9. that if the Castle Hill parties had relied on the fit-out costs represented in the disclosure document, the primary judge made no finding as to the actual fit-out costs and no finding that the actual fit-out costs exceeded the upper range of the amount of $650,000 represented in the disclosure document: C.3.b and C.3.c. 10. Castle Hill Issue 3: Grounds 1 and 4, in substance, assert that the primary judge was in error in concluding that the Blacktown parties relied on representations in the Blacktown disclosure document relating to the establishment costs of a franchise business. For the same reasons as for the Balcatta parties, Mr Husseini contends the primary judge should have disregarded the Castle Hill parties' evidence-in-chief about reliance: C.4.e and C.4.f. Further, it was not open to the primary judge to infer that the Castle Hill parties relied on the representations in the disclosure document relating to the fit-out establishment costs based on the evidence and other findings. It was not so open because: 11. the Castle Hill disclosure document contained the same disclaimers and qualifications as for the other disclosure documents: C.4.a; 12. at the time of execution of the Balcatta franchise agreement and guarantees, the Castle Hill parties were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): C.4.b; 13. the Castle Hill parties relied on the information provided to them by UFG in July 2017: C.4.d; 14. the Castle Hill parties knew that the fit-out costs represented in the disclosure document was not a guarantee: C.4.c; and 15. the Castle Hill parties wrongly understood that the disclosure document represented 'actual' historical amounts rather than estimates where actual costs would depend on the specific location of the franchise business: C.4.g. 16. Castle Hill Issue 4: Grounds C.4.f and C.4A contend, in substance, for the same reasons that it was not open to infer reliance or to conclude that reliance was reasonable, the primary judge failed to give reasons or adequate reasons for his conclusion that the Castle Hill parties had relied upon the misleading representations made in the disclosure document. Mr Husseini contends that the reference to these matters at J [555] is inadequate to explain 'how' the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document. Applicable Legal Principles 1. The issues raised in the grounds of appeal primarily concern characterisation, reliance, causation and damage. Although none of the grounds except those relating to damages assert that the primary judge made an error of law in identifying the applicable principles and there was no real dispute between the parties about those principles in the appeal, it is helpful to set out and summarise those principles as they provide the framework within which to consider the asserted errors of the primary judge. Misleading conduct Characterisation 1. In Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195 Keifel CJ, Gageler, Gordon, Edelman and Gleeson JJ summarised the applicable principles for determining a breach of s 18 of the ACL as follows: [80] The principles are well established. Determining whether a person has breached s 18 of the ACL involves four steps: first, identifying with precision the "conduct" said to contravene s 18; second, considering whether the identified conduct was conduct "in trade or commerce"; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was "misleading or deceptive or … likely to mislead or deceive" [See Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; 294 ALR 404; 99 IPR 197; [2013] HCA 1 at [89]. See also Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904 at [14]–[15]; Reckitt Benckiser (Australia) Pty Ltd v Procter & Gamble Australia Pty Ltd [2015] FCA 753 at [35]]. [81] The first step requires asking: "what is the alleged conduct?" and "does the evidence establish that the person engaged in the conduct?" [Compare Google at [89]]. The third step considers what meaning that conduct conveyed to its intended audience [Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; 291 ALR 399; 91 ACSR 128; [2012] HCA 39 at [26]]. As in this case, where the pleaded conduct is said to amount to a representation, it is necessary to determine whether the alleged representation is established by the evidence [Telstra at [14], citing Campomar [Sociedad Limitada v Nike International Ltd (2002) 202 CLR 45] at [105], National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420; 49 ACSR 369; ATPR ¶42-000 (National Exchange) at [18] and Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106; [2006] FCAFC 22 at [37]]. The fourth step is to ask whether the conduct in light of that meaning meets the statutory description of "misleading or deceptive or … likely to mislead or deceive"; that is, whether it has the tendency to lead into error [Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 186; 96 ACSR 475; [2013] HCA 54 at [39]]. Each of those steps involves "quintessential question[s] of fact" [Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459; [2004] FCA 987 at [49]. See also Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; 212 ALR 357; [2004] HCA 60 at [109]]. [82] The third and fourth steps require the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons [See Campbell v Backoffıce Investments Pty Ltd (2009) 238 CLR 304; 257 ALR 610; 73 ACSR 1; [2009] HCA 25 at [24]–[25]. See also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199; 42 ALR 1 at 7; 1A IPR 684 at 689 (Parkdale Custom Built Furniture); Campomar at [102]–[103]]. That context includes the immediate context — relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation — and the broader context of the relevant surrounding facts and circumstances [Parkdale Custom Built Furniture at CLR 199; ALR 7; IPR 689; Butcher at [39], [109]; Campbell at [25]–[26], [102]; TPG Internet at [51]–[52]]. It has been said that "[m]uch more often than not, the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character" [Google at [92]]. That said, the description of the conduct alleged and identified at the first step should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive. Attribution, disclaimers and other context 1. Where damages are sought under s 236 of the ACL on the ground that a person has suffered loss or damage because of conduct in contravention of s 18 of the ACL, establishing a causal link between the impugned conduct and the loss that is claimed depends on analysing the impugned conduct in relation to the claimant alone and not as a member of a class to which the conduct was directed in a general sense. It is necessary to consider the particular conduct of the particular person in relation to the particular claimant 'bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known'. The 'mere fact that a person [has] engaged in the conduct of supplying a document containing misleading information [does] not mean that that person [has] engaged in misleading conduct: it [is] crucial to examine the role of the person in question': Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [36]-[37] (Gleeson CJ, Hayne and Heydon JJ). 2. Where an agent passes on information on behalf of a principal 'it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of [the agent's] "conduct" divorced from "disclaimers" about that "conduct" and divorced from other circumstances which might qualify its character: Butcher at [38]-[39]. When the agent's conduct is viewed as a whole and in the context of disclaimers and other circumstances, it may be that the principal is the source of the information and the agent merely passes it on for what it is worth and expressly or impliedly disclaims any belief in its truth: Yorke v Lucas [1985] HCA 65; 158 CLR 661 at 666. The agent may simply be communicating what the principal was representing without adopting or endorsing it: Butcher at [40], [50]-[51]. 3. Nonetheless, where a person is acting as agent of a body corporate, it is well-established that it is possible for both the person and the body corporate to engage in conduct that contravenes s 18 of the ACL: Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 at [13]. However, the person may act as a corporate organ, binding the company, but not the person individually. It is a question of fact whether the act of an agent is conduct of the agent or a ministerial act as an organ of the company: Australian Securities and Investments Commission v Narain [2008] FCAFC 211; 169 FCR 211 at [94]-[97] (Jacobson and Gordon JJ) and the authorities there cited. See, also, Pico Holdings Inc v Voss [2004] VSC 263 at [154]-[157]. Representations about future matters 1. In general, it is not possible to verify or falsify an opinion, promise or prediction at the time it is expressed or made. However, a statement of an opinion, a promise or a prediction may convey an express or implicit statement about the state of mind of the person making the statement to the effect that the person genuinely holds the opinion or believes that the promise or prediction will eventuate. The statement about the person's state of mind is a statement about an existing fact that may be verified or falsified. Likewise, a statement of an opinion, a promise or a prediction may convey an express or implicit statement to the effect that the person has reasonable grounds for holding the opinion or believing that the promise or prediction will eventuate: see, e.g., Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 167; 2 FCR 82 at 88. 2. Where a statement is made about a future matter (such as a promise or prediction) it may be quite difficult for the person to whom the statement is made to demonstrate that the person who made the statement had no reasonable grounds for it. As a consequence, s 51A was introduced into the Trade Practices Act 1974 (Cth) and equivalent provisions in the Fair Trading Acts of the States and Territories. Section 51A is now reflected in s 4 of the ACL. However, s 4 does not establish a norm of conduct. The norm is contained in s 18. Section 4 operates as an evidentiary provision that facilitates proof that a representation as to a future matter was misleading or deceptive or likely to mislead or deceive: see, e.g., North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 at [28]-[31] (Mansfield, Greenwood and Barker JJ). 3. Representations as to future matters may be qualified in such a manner that the relevant question is whether there were reasonable grounds for the qualified representation not reasonable grounds as to an unqualified representation: Tomasetti v Brailey [2012] NSWCA 399 at [21], [37], [57] (Macfarlan JA, McColl and Campbell JJA agreeing). In that case, advice about the prospect of future income of investments were representations as to future matters. The advice was not inherently unsound, but unsound if made without knowledge of the risks associated with the investments. There were reasonable grounds for representations as to future income provided that the qualifications about the associated risks were made known, which they were. On the evidence and the case conducted by the parties, the representor had reasonable grounds for making qualified representations. 4. Section 4(1) of the ACL must also be understood in the context in which a representation as to a future matter is taken to be misleading not because the prediction is inaccurate, but because an element of such a representation is that the person making it has not reasonable grounds for making the representation. Therefore, if a person does not have such reasonable grounds the representation is taken to be misleading. Section 4(2) operates to place an evidentiary burden on the person who made the representation to adduce evidence that there were reasonable grounds for making the representation, otherwise it is taken that there were not such grounds. 5. Understanding the nature of the 'conduct' that is taken to be misleading in the context of future representations is important for at least two reasons. First, the person's conduct, as a whole, may not be misleading if the representation is qualified so as to indicate that the person making the representation does not, in fact, have reasonable grounds for making a representation with respect to a future matter. Similarly, subsequent conduct of the person who made the representation may indicate that the person did not have reasonable grounds for making the representation when made or no longer has reasonable grounds for maintaining the representation. Second, when considering if another person suffered loss or damage because of the conduct of the person making the representation, it is necessary to establish a causal nexus between the absence of reasonable grounds for the representation with respect to a future matter (the relevantly misleading conduct) and the loss or damage. For example, a person who relied on a representation as to a future matter because it was understood to be a guarantee about a future matter and not because it was a prediction about the future with reasonable grounds would not establish that the loss or damage was because of the relevantly misleading conduct, but rather it would be because of a misunderstanding about the nature of the representation made. Causation, reliance and damages 1. Section 236 has at least five discrete elements. First, it identifies the legal norms the contravention of which gives rise to a cause of action under the section. Second, it identifies the persons by and against whom that action lies. Third, it specifies the harm for which the action lies as the suffering of loss or damage. Fourth, it stipulates a causal requirement that the claimant's harm must be 'because of' the contravention. Last, it identifies the measure of compensation as 'the amount of the loss or damage' suffered: Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at [95] (Gummow J); I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 at [50] (Gaudron, Gummow and Hayne JJ). Questions of causation and damage are principally concerned with the last two of these elements. Causation 1. Causation can be a difficult concept particularly in circumstances in which there are or may be multiple factual causes of loss or damage. In the frequently cited judgment of Mason CJ in March v E & MH Stramare Pty Ltd [1991] HCA 12; 171 CLR 506, his Honour observed that the legal concept of causation differs from philosophical and scientific notions of causation because questions of cause and consequence are not the same for the law as for philosophy and science: March v Stramare at 509. Mason CJ went on to address the but for test of causation and said that the test, applied as a negative criterion of causation, has an important role to play in the resolution of the question, but when applied as an exclusive criterion of causation yields unacceptable results that are contrary to common sense from a legal perspective. Consequently, the results of the but for test must be tempered by the making of value judgments and the infusion of policy considerations: March v Stramare at 515-517. 2. This 'common sense' notion of causation has been referred to in numerous decisions of the High Court: see, e.g., Medlin v State Government Insurance Commission [1995] HCA 5; 182 CLR 1 at 6-7 (Deane, Dawson, Toohey and Gaudron JJ). However, there is now reason to doubt whether there is a 'common sense' notion of causation which can provide a useful, still less universal, legal norm: Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; 221 CLR 568 at [96]-[97] (Gummow, Hayne and Heydon JJ); Travel Compensation Fund v Robert Tambree (t/as R Tambree & Assocs) [2005] HCA 69; 224 CLR 627 at [45] (Gummow and Hayne JJ). There are cases in which the answer to a question of causation will differ according to the purpose for which the question is asked: Travel Compensation Fund at [45], citing Chappel v Hart [1998] HCA 55; 195 CLR 232 at [63]-[64] (Gummow J), [122] (Hayne J); Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 at 29, 31 (Lord Hoffmann). Therefore, there are cases in which the answer to the question will require examination of the purpose of a particular cause of action, or the nature and scope of the defendant's obligation in the particular circumstances: Travel Compensation Fund at [45], citing Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] AC 883 at 1091 [70]-[71] (Lord Nicholls of Birkenhead). 3. Notions of 'cause' involved in statutory claims made under the ACL (NSW) or ACL (WA) are to be understood by reference to the statutory subject, scope and purpose of the ACL as applied under the Fair Trading Act (NSW) and Fair Trading Act (WA): Travel Compensation Fund at [49] citing Allianz Australia Insurance at [99]. In Travel Compensation Fund Gummow and Hayne JJ considered that the question presented by s 68 of the Fair Trading Act (NSW) (an earlier version of s 236 of the ACL (NSW)) was whether the conduct of each respondent, that constituted a contravention of that Act, was a cause of the loss or damage sustained: Travel Compensation Fund at [49] citing I & L Securities at [26] (Gleeson CJ), [57] (Gaudron, Gummow and Hayne JJ). 4. The High Court has consistently emphasised that, while tools of analysis drawn from the common law, such as deceit (misrepresentation and reliance), within the statutory framework of the ACL may sometimes be helpful in identifying contravening conduct and deciding whether loss or damage was suffered because of that conduct, common law concepts must not be permitted to obscure the need to identify contravening conduct and a causal connection between that conduct and the loss or damage alleged: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [102] (Gummow, Hayne, Heydon and Kiefel JJ). Reliance 1. In the context of contraventions in the form of misleading conduct constituted by misrepresentations, acts done by the representee in reliance upon the misrepresentation amount to a sufficient connexion to satisfy the concept of causation. And, if those acts result in economic or financial loss, it will ordinarily be recoverable under s 236. The claimant is entitled to recover a sum representing the prejudice or disadvantage the claimant has suffered in consequence of the claimant altering its position under inducement: Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 348 (Mason CJ, Dawson, Toohey and Gaudron JJ). See, also, Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 at 526 (Mason CJ, Dawson, Gaudron and McHugh JJ). 2. In a separate judgment in Sellars, Brennan J observed (at 356-348) (footnotes omitted): … When conduct done in contravention of s. 52 of the Act consists in the making of false representations inducing a person to act or to refrain from acting, the relevant loss or damage may flow from that person's own act or omission and only indirectly from the other person's contravening conduct. In such a case, the person's own act or omission is a link – not a break – in the chain of causation which stretches from the contravening conduct to the loss thus produced and the amount of the loss is recoverable by the person who has suffered it. The existence of a compensable loss and the amount of compensation is ascertained by inquiring whether and by how much that person is worse off as a result of acting or refraining from acting on the inducement of false representations by the other person. … See, also, Henville v Walker [2001] HCA 52; 206 CLR 459 at [14] (Gleeson CJ). 1. In the joint judgment of McHugh, Hayne and Callinan JJ in Marks v GIO, after observing that the remedies provided by s 82 and s 87 of the Trade Practices Act were not confined by analogies, whether with tort or otherwise, their Honours then said (footnotes omitted): 41 This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas [(1985) 157 CLR 215]), the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act. 42 It follows, then, that a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct. And even this inquiry may not conclude the question. Analysing the question of causation only by reference to what is, in essence, a "but for" test has been found wanting in other contexts and it may well be that it is not an exclusive test of causation in this area either. But that is not a question which we need to consider in this case. For the moment it is enough to say that s 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act. 1. Later, their Honours observed that '[a] party misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted.': Marks v GIO at [48]. 2. Causation, including the effect of a disclaimer, is a question of fact: Campbell at [31] (French CJ). It is not enough for the claimant to show that the impugned conduct might have induced entry into a contract or transaction. 'Ultimately, the "causative threshold" beyond which liability attaches to a misrepresentation which is one of a number of factors, inducing a decision that produces loss, will be a question of judgment': Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd [1993] FCA 192; 41 FCR 229 at 234-235 (Lockhart, Gummow and French JJ). 3. There may be direct evidence from a representee about reliance. However, '[j]udicial warnings have been sounded about the opportunistic nature of evidence given after the event': Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131; 220 ALR 211 at [105] (Branson, Nicholson and Jacobson JJ) and the authorities there cited. Together with or in the absence of direct evidence as to reliance, the Court may rely on the nature of the misleading conduct to draw an inference that the person to whom the conduct was directed was induced to act as that person in fact acted or refrained from acting as that person would have otherwise acted. Where a representation that is objectively likely to induce the representee to enter into a transaction and that person in fact enters into the transaction, an inference may be drawn that the representation operated as an inducement for the person to do so. That inference may be rebutted, for example, by showing that the representee, before entering into the transaction, either knew of the true facts, or whether knowing or not, did not rely on the representation. If the representee does not, in fact, rely on the representation there is no case. The representation need not be the sole inducement. It is sufficient so long as it plays some part, even if only minor, in contributing to the entry into the transaction: Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 at 240-241 (Forster, Woodward and Wilcox JJ); Gould v Vaggelas [1984] HCA 68; 157 CLR 215 at 236 (Wilson J) and 250-251 (Brennan J). 4. Although it is necessary to maintain the conceptual distinction between characterisation of conduct (and the notional effect of conduct to induce error) and causation, in practical terms, there can be an overlap because questions of characterisation of conduct, causation and damage are related. The same contextual factors involved in assessing the notional effect of conduct may play a role in determining causation; namely, whether a claimant has suffered loss or damage because of that conduct: Campbell at [24] (French CJ). That overlap may arise where an agent provides information and disclaims its accuracy or it is evident that the agent is not the source of the erroneous information: 3Meg.Com Pty Ltd v TM & SM Pike Pty Ltd [2012] WASCA 128; 43 WAR 350 at [60]-[64] (Murphy JA, Pullin and Newnes JJA agreeing) and the authorities there cited. Also, a well-drafted disclaimer, drawn to the representee's attention and acknowledged to have been made, may be sufficient to negate reliance: Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 54; ATPR (Digest) 46-048 at 53,147, 53,151; Poulet Frais at [101]-[105]. 5. The facts, findings and reasoning in 3Meg.com are instructive. In that case a vendor sold a business to a purchaser. The vendor had purchased the business from a company in Queensland. The vendor had placed an advertisement in a newspaper. The primary judge found that it was not a 'puff' and that it conveyed a representation to the effect that a person who joined the Queensland company's agency network could earn a net profit of $200,000 per annum and that was a representation as to a future matter for which there were not reasonable grounds and, as such, it was misleading. The principal of the purchaser had extensive business qualifications and experience. The purchaser knew that the vendor had purchased the business from the Queensland company and had not operated the business or generated any income and that, in effect, it was an opportunity to enter into a contract with the Queensland company the approval of which was necessary for the sale. The purchaser's principal communicated directly with the Queensland company to obtain detailed information about the business. The vendor informed the purchaser that the figure of $200,000 had come from the Queensland company. The primary judge found, amongst other things, that the purchaser could not reasonably have relied on anything the vendor had said in these circumstances. Murphy JA found that the primary judge had made no error in reaching that conclusion. Notwithstanding that the principal of the purchaser had given evidence-in-chief in a form not dissimilar to that of the Balcatta, Blacktown and Castle Hill parties in this case, Murphy JA said that it was open to the primary judge to conclude that an experienced businessperson, such as the purchaser's principal, would not have relied on the vendor's statement and to infer that, in all the circumstances, the profit figure in the advertisement was not a real inducement to the purchaser: 3Meg.com at [100]. Damages 1. The legal principles applicable to the assessment of damages and the role that causation plays in that assessment under s 236 of the ACL was not a significant focus of the parties' written or oral submissions in the appeal. For the purpose of framing the legal issue that arises from the damages grounds of appeal, 'it may safely be assumed that the [claimant] is entitled to recover "a sum representing the prejudice or disadvantage [the claimant] has suffered in consequence of [it] altering [its] position under the inducement" of the misleading conduct or "the actual damage directly flowing from" that conduct': Wardley Australia at 526. It may also be accepted that where there are multiple contributing causes of loss or damage, the conduct in contravention need not be the sole cause and need only be a material cause of that loss or damage to satisfy the causation element in s 236 of the ACL: Henville v Walker at [12]-[36] (Gleeson CJ), [57]-[70] (Gaudron J), [95]-[106], [130]-[134] (McHugh J, Gummow J agreeing), [158]-[166] (Hayne J, Gummow J agreeing); I & L Securities at [19]-[33] (Gleeson CJ), [42]-[62] (Gaudron, Gummow and Hayne JJ), [83]-[92] (McHugh J). It is, however, necessary that there be some actual damage, prospective loss is not enough: Wardley Australia at 527. 2. However, the extent to which loss or damage is divisible is more controversial and is not a straight-forward matter conceptually, legally or factually. Although Henville v Walker and I & L Securities illustrate that loss or damage is generally not divisible and contravening conduct need only be a material cause of the relevant loss or damage, these authorities and others are predicated on the claimant having demonstrated that the contravening conduct was a legal cause of all the loss or damage. It is recognised that there may be circumstances in which the contravening conduct is not the legal cause of part of a claimant's loss or damage even though it may be a factual cause of that part of the loss or damage: Henville v Walker at [26]-[36] (Gleeson CJ), [66]-[70] (Gaudron J), [144]-[148] (McHugh J), [166] (Hayne J); I & L Securities at [24]-[30] (Gleeson CJ), [54]-[62] (Gaudron, Gummow and Hayne JJ), [84]-[92] (McHugh J), [215]-[217] (Callinan J). However, no doubt, as the joint reasons record, 'because the relevant question is whether the contravention was a cause of (in the sense of materially contributed to) the loss, cases in which it will be necessary and appropriate to divide up the loss that has been suffered and attribute parts of the loss to particular causative events are likely to be rare': I & L Securities at [62]. The damages grounds of appeal raise the question of whether the loss or damage flowing from Mr Husseini's misleading conduct falls within that category of rare cases where loss or damage is divisible in that manner. Adequacy of reasons 1. As for adequacy of reasons, it is well-established that a trial judge is under an obligation to give reasons for the decision or judgment made at the conclusion of the trial. Adequacy of the reasons depends on the circumstances of the case and the nature of the proceedings. At a minimum, the reasons must be adequate for the exercise of the facility of appeal. Reasons are not intelligible if they leave the reader to wonder which of a number of possible routes has been taken to reach the conclusion expressed. Failure to expose the path of reasoning is an error of law: Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45 at [498]-[504] (Mortimer, Lee and Halley JJ) and the authorities there cited. But, reasons are not required to mention every fact or argument relied upon by the losing party as relevant to an issue: Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447 at [62] (Gleeson CJ, McHugh and Gummow JJ). Nor will reasons be inadequate merely because they fail to undertake a minute explanation of every step in the reasoning process that leads to the judge's conclusion: DL v The Queen [2018] HCA 26; 266 CLR 1 at [33] (Kiefel CJ, Keane and Edelman JJ). If reasons are inadequate, the appeal court may decide the matter on the evidence before the appeal court rather than remit it to the trial judge: Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130 at [37] (Nettle JA, Batt and Vincent JJA agreeing). Balcatta Franchise 1. The first issue that emerges from the grounds of appeal concerning the Balcatta parties is whether Mr Husseini individually made misleading representations about establishment costs contained in the first Balcatta disclosure document. A second and related issue is whether Mr Husseini's individual conduct, of which his representations in the disclosure document form part, in context and in the circumstances of the relevant course of conduct as a whole was misleading. Franchising Code of Conduct 1. Part of the context that is common to all claimant parties is the purpose for which the disclosure documents were created and given to the claimant parties. That purpose is informed by the Franchising Code of Conduct. 2. Part IVB of the CC Act contains provisions relating to industry codes. Section 51AE makes provision for regulations to be made prescribing an industry code. The Competition and Consumer (Industry Codes – Franchising) Regulations 2014 (Cth) have been made under s 51AE. These are not regulations made under s 139G of the CC Act and, therefore, do not form part of the ACL (NSW) or ACL (WA). Regulation 4 provides that the code set out in Sch 1 is prescribed and is mandatory for s 51AE. The code set out in Sch 1 is the Franchising Code of Conduct. 3. Part 2 of the Code sets out certain requirements for disclosure before entry into a franchise agreement. The master franchisor need not comply with the requirements in relation to a subfranchisee: s 7 of the Code. Here, relevantly, UFG was to comply with all disclosure requirements prescribed in the Code. The obligation to comply is imposed on UFG and not Mr Husseini. 4. Those obligations include a requirement to create a disclosure document relating to a franchise that complies with certain requirements: s 8(1), ss 8(3)-(5). Relevantly, the purpose of a disclosure document is to give a prospective franchisee information from the franchisor to help the franchisee make a reasonably informed decision about the franchise and to give a franchisee current information from the franchisor that is material to the running of the franchised business: s 8(2). 5. The requirements of a disclosure document include that the information in a disclosure document must be set out in the form and order and use the headings of Annexure 1 of the Code: s 8(3). Further, that a disclosure document must be signed by 'the franchisor, or a director, officer or authorised agent of the franchisor': s 8(4). After entering into a franchise agreement, the franchisor must, subject to certain qualifications, update the disclosure document within 4 months after the end of each financial year: ss 8(6)-(8). Relevantly, a franchisor must give a prospective franchisee a copy of the franchise agreement, in the form in which it is to be executed, and a copy of the disclosure document (as updated if necessary) at least 14 days before the franchisor and the prospective franchisee enter into a franchise agreement: s 9(1), s 9(1A). 6. It is also of relevance that the Code does not prescribe as a purpose of a disclosure document that it is to contain an estimate or prediction of the costs a prospective franchisee is likely to incur establishing a franchise business. However, relevantly, cl 14.3 of Annexure 1, in effect, requires the franchisor to provide details of the 'range of costs to start operating the franchised business, based on current practice' for certain matters including 'equipment, fixtures, other fixed assets, construction, remodelling, leasehold improvements and decorating costs'. Clause 14.4 provides that the details must include: (a) a description of the payment; and (b) the amount of the payment or the formula used to work out the payment; and (c) to whom the payment is made; and (d) when the payment is due; and (e) whether the payment is refundable and, if so, under what conditions. Clause 14.5 provides that if the amount of the payment cannot be easily worked out – the upper and lower limits of the amount. It is evident that Annexure 1 and cll 14.3 to 14.5 are based on an assumption that there is a 'current practice' from which a range of costs to start operating the franchised business can be 'worked out'. First Balcatta disclosure document 1. It may be inferred that the first Balcatta disclosure document was created by UFG for the purpose of complying with the requirements of the Code. The disclosure document reproduces more-or-less word-for-word the text of Annexure 1 of the Code. That part of the disclosure document is in bolded text. Other parts of the disclosure document that contain information that has been added to the text of Annexure 1 is not bolded. On the first page of the document the franchisor is identified as UFG and it is signed by Mr Husseini as 'director … of the franchisor'. That is, Mr Husseini signed the document in conformity with the requirement in s 8(4) of the Code. The primary judge found that UFG gave the disclosure document to the Balcatta franchisee. That is, the disclosure document was provided to the Balcatta franchisee in compliance with the requirement in s 9 of the Code. 2. The disclosure document identifies the trading name and trademark of the franchisor as 'UFC Gym'. The trademark is reproduced in a table under cl 8 of the document and the same trademark is displayed prominently at the head of each page of the document. Except for information about officers, the document consistently refers to the 'franchisor' as the person providing the information contained in the document. It is also the 'franchisor' that is expressed to be the person providing qualifications, disclaimers or admonitions to the prospective franchisee. 3. Clause 2.4 of the disclosure document indicates that the business commenced in September 2015 and, at the date of the document, had operated for less than one year. Clause 2.8 identifies Mr Husseini as the sole director of UFG and Mr Hagemrad as the Chief Executive Officer of UFG. Clause 3.1 sets out their respective 'relevant business experience' for the past 10 years. The summary for Mr Hagemrad stated that he had been a Subway franchisee since 2003 and had been elected to the Subway Franchisee Advertising Fund Board for 9 years. It also said that he had pioneered frozen yogurt in the Australian market by developing a franchise model in 2005. The summary for Mr Husseini indicated that he had no franchise business experience. Further, the summaries for both Mr Hagemrad and Mr Husseini disclosed no experience or knowledge concerning owning or operating gyms or fitness clubs. Clause 3.2 indicated that the franchisor had not had direct experience operating a gym business and had not offered any franchises that are substantially the same as the franchise the subject of the document. It indicated that officers of the franchisor had been involved in offering franchises for the Subway brand for 20 years. In context, that must be read as a reference to Mr Hagemrad and not Mr Husseini. 4. Clause 6.1, cl 6.2 and Sch 1 set out information about existing franchises. A table under cl 6.1 and Sch 1 referred to in cl 6.2 indicated that there were no existing franchised businesses, no existing franchisees and no businesses owned or operated by the franchisor or an associate that are substantially the same as the franchised business. 5. Clause 14 and Sch 5 set out information about 'other payments'. Relevantly, cl 14 provided: 14. Other payments … Establishment costs 14.3 Details of the range of costs to start operating the franchised business, based on current practice, for the following matters: (a) real property, including property type, location and building size; (b) equipment, fixtures, other fixed assets, construction, remodelling, leasehold improvements and decorating costs; (c) inventory required to begin operation; (d) security deposits, utility deposits, business licences, insurance and other prepaid expenses; (e) additional funds, including working capital, required by franchisee before operations begin; (f) other payments by a franchisee to begin operations. The information for item 14.3 is set out in Table 1 of Schedule 5. 14.4 For items 14.3, the details for each payment must include: (a) a description of the payment; and (b) the amount of the payment or the formula used to work out the payment; and (c) to whom the payment is made; and (d) when the payment is due; and (e) whether the payment is refundable and, if so, under what conditions. The information for item 14.4 is set out in Table 1 of Schedule 5. 14.5 For item 14.4, if the amount of the payment cannot easily be worked out – the upper and lower limits of the amount. … 14.10 To avoid doubt, this item covers a payment of significant capital expenditure. The Tables contained in Schedule 5 may outline payments of significant capital expenditure required to be incurred by the franchisee during the term or at the end of the term on a renewal, extension or entering into a new agreement. It may not be possible to predict exactly the amount of that expenditure and a high low range may be provided where possible. There may also be additional obligations in the franchise agreement, that require the franchisee to expand significant capital expenditure (in addition to these amounts disclosed) in certain circumstances including those outlined in clause 30 of the Code. (The bolded text is original and taken from Annexure 1 of the Code. Underlining added.) 1. Table 1 of Sch 5 provided: Table 1: Establishment Costs (Items 14.3, 14.4 and 14.5) Expenditures Description of payment Amount of the payment or the formula used to work out the payment To whom the payment is made When the payment is due Whether refundable; if so, under what circumstances (a) Real property (including property type, location, and building size) Leasing up front costs including your legal costs of reviewing lease and the like $3,000 - $5,000 Your solicitor and other third party suppliers around the time of signing lease Not refundable Costs of applying for development approval from the local council, if required Will vary depending on site, Council and zoning Your town planner As required by town planner Not refundable (b) Equipment, fixtures, other fixed assets Lease or purchase of equipment $250,000 - $350,000 Franchisor, Various other suppliers Prior to opening and upon purchasing Not refundable (c) construction, remodelling, leasehold investments, decorating costs Building, construction and fitout costs $190,000 - $360,000 (approx. $300 psm) Franchisor and Various contractors Prior to opening during building stage Not refundable (d) [sic] Inventory required to begin operation Merchandise, Drinks and supplies $6,000 - $10,000 Franchisor Prior to opening Not refundable (d) Security deposits, utility deposits, business licences, insurance and other prepaid expenses Deposits for Electricity, Insurance etc Varies based on supplier Your preferred supplier Prior to opening Yes (e) Additional funds (including working capital, required by the franchisee before operations begin) Required capital to maintain the business operations Estimated 3-6 months working capital dependent on rent Third Parties As incurred Not refundable $35,000 - $65,000 (f) Other payments by a franchisee to begin operations Travel expenses for training, Pre-opening advertising $20,000 - $30,000 Third parties Prior to opening Not refundable 1. Schedule 5 commences with the following text box. Mr Husseini contends that this text contains what he describes as disclaimers and qualifications. Schedule 5 Item 14 Tables of establishment costs and payments The information on the following pages sets out the range of costs usually encountered by a new franchisee when establishing a franchised business based on current practice. This information is provided as a guide only and is not to be taken as a guarantee. The information provided includes a number of assumptions which WILL VARY depending upon many factors dependent on the specific circumstances of each individual franchise, the franchisee's management skill, experience and business acumen, the existing assets of the franchise and local economic conditions and the suppliers. The assumptions are given to assist the franchisee's independent financial advisers to form their own view on the financial information and likely variances or additional costs in the context of the franchisee's specific circumstances. (Bold emphasis added. Italics, underlining and capitalisation original.) 1. Schedule 5 ends with the following further text. The above amounts relating to each recurring or isolated payment, that is within the knowledge or control of the Franchisor or is reasonably foreseeable by the Franchisor, that is payable by the Franchisee to a person other than the Franchisor or an associate of the Franchisor, are estimates only and may differ from franchised store to franchised store based on the following factors: (a) store performance and turnover; (b) location and size of store; (c) number of employees; and (d) any other individual factors. IMPORTANT NOTE: The franchisor makes no representation that the information contained in this Schedule covers the full range of expenses or outgoings experienced by the franchisor's franchisees. Whilst the information is indicative of the types of reasonably foreseeable expenses that a franchisee operating a franchise might incur, it is not intended to provide an exhaustive list of expenses that a franchisee may incur, as each franchise and franchisee is unique. the franchisor cannot estimate the expenses or outgoings of any franchisee or franchised business as these may vary widely between franchises and franchisees and are subject to a number of factors that are beyond the control of the franchisor including (but not limited to) the following, many of which may change over time and differ from location to location: * the efforts and personal commitment of the franchisee and its directors and staff and how hard they are prepared to work; * the skills and ability of the franchisee, its directors and staff; * the franchisee's compliance with the system; * the length of time the franchisee has operated the business; * the management and other relevant experience of the franchisee and/or its directors and staff; * competitor activity; * the sales ability of the franchisee and its staff; * the franchisee's pricing policy; * the standard of customer service provided to customers of the franchisee; * the franchisee's training and management of staff; * the demographics (including without limitation, the level of disposable income and age) and socio-economic conditions of the area where the store is located and in nearby areas; * rent and occupancy costs; * wage costs; * the franchisee's marketing ability and willingness to utilise appropriate marketing devices; * the franchisee's ability to manage its financial position; * the franchisee's debt to equity ratio and its finance arrangements; * the prevailing economic climate and general business conditions as well as those in the area where the franchise is located and nearby areas; * regulatory requirements. By providing this information, neither the franchisor nor any other person gives any guarantee or makes any representation about the likely success or failure of the franchisee. Neither the franchisor nor any other person gives any guarantees, warranties, or assurances in relation to the potential of expenses or outgoings, if any, or targets for any particular store that a prospective franchisee is considering purchasing. Each prospective franchisee must make their own detailed inquiries and investigations to potential sales, income, expenses and profitability, if any, for any particular franchise that they are considering purchasing, and set their own financial targets. (Underlining added. Italics, bold and capitalisation original.) 1. As is required by Annexure 1 of the Code, the disclosure document also contains the following text box on the first page under the date of the document (31 March 2016): This disclosure document contains some of the information you need in order to make an informed decision about whether to enter into a franchise agreement. It should be read together with the information statement you have received. Entering into a franchise agreement is a serious undertaking. Franchising is a business and, like any business the franchisee (or franchisor) could fail during the franchise terms. This could have consequences for the franchisee. A franchise agreement is legally binding on you if you sign it, You are entitled to a waiting period of 14 days before you enter into this agreement. If this is a new franchise agreement (not the transfer or renewal of a franchise agreement, nor the extension of the terms or the scope of a franchise agreement), you will be entitled to a 7 day "cooling off" period after signing the agreement, during which you may terminate the agreement. If you decide to terminate the agreement during the cooling off period, the franchisor must, within 14 days, return all payments (whether of money or of other valuable consideration) made by you to the franchisor under the agreement. However, the franchisor may deduct from the amount the franchisor's reasonable expenses, if the expenses or their method of calculation have been set out in the agreement. Take your time, read all the documents carefully, talk to other franchisees and assess your own financial resources and capabilities to deal with the requirements of the franchised business. You should make your own enquiries about the franchise and about the business of the franchise. You should get independent legal, accounting and business advice before signing the franchise agreement. It is often prudent to prepare a business plan and projections for profit and cash flow. You should also consider educational courses, particularly if you have not operated a business before. (Underlining added.) Balcatta issue 2: Were misleading representations made in the first Balcatta disclosure document? 1. Relevant parts of the first Balcatta disclosure documents have been set out in full because it is important to read Table 1 items (b) and (c) in the context of the disclosure documents as a whole, including the qualifications (or disclaimers) contained in Sch 5 and other information that informs the quality and reliability of the information referred to in that Table. 2. Part of the context also includes information about UFG (the franchisor) and Mr Husseini. There is nothing in the text of the disclosure document that suggests that Mr Husseini is the source of the information or that he has any direct knowledge or experience that would place him in a position to estimate costs. Except that Mr Husseini signed the document, as director, there is also nothing to suggest that he adopted the statements made in the document. 3. Part of the context also includes information about the number and location of franchise businesses. As of 31 March 2016 (or as at 1 July 2016), the document represents there were no existing franchise businesses, no existing franchisees and no substantially similar businesses operated by the franchisor or an associate. That information has to be read together with the following other statements. 4. In clause 14.3 to the effect that Table 1 in Sch 5 sets out, amongst other things '[d]etails of the range of costs to start operating the franchised business, based on current practice, for the following matters … (b) equipment, fixtures, other fixed costs, construction, remodelling, leasehold improvements and decorating costs'. 5. In the first text box in Sch 5 to the effect that Table 1 sets out 'the range of costs usually encountered by a new franchisee when establishing a franchised business based on current practice'. 6. In the text following the Tables in Sch 5 to the effect that amounts relating to isolated payments are 'within the knowledge or control of the Franchisor or is reasonably foreseeable by the Franchisor'. It is self-evident that the source of the information in Table 1 for the range of establishment costs could not have been 'costs usually encountered by a new franchisee when establishing a franchised business' 'based on current practice' or payments within 'the knowledge or control of the franchisor' because there were no franchisees that had established a new franchised business and there was no substantially similar business established by the franchisor or an associate of the franchisor. Therefore, it was plain that the source of the information could not have been derived from actual costs incurred in the establishment of UFG Gym businesses in Australia and, as such, the representations was of estimates of costs reasonably foreseeable by the franchisor. 1. In that context, the figures referred to in Table 1 could not reasonably be understood as a range of actual costs usually encountered by new franchisees of a UFC Gym franchise in Australia based on current practice. Otherwise, the source of the information and grounds for the statement about the range of costs in Table 1 are not identified. 2. The context also includes the statements Mr Husseini characterises as disclaimers or qualifications. These are primarily contained in the text boxes at the start and end of Sch 5 before and after the Tables. These include statements to the effect that the 'information is provided as a guide only and is not to be taken as a guarantee' (emphasis added). Further, the 'information provided includes a number of assumptions which WILL VARY depending upon many factors dependent on the specific circumstances of each individual franchise …' (emphasis original) including 'the existing assets of the franchise and local economic conditions and the suppliers' (emphasis added). 3. The important note at the end of Sch 5 indicates that the 'franchisor makes no representation that the information contained in this Schedule covers the full range of expenses or outgoings experienced by the franchisor's franchisees'. It also indicates that the 'information is indicative of the types of reasonably foreseeable expenses that a franchisee operating a franchise might incur, it is not intended to provide an exhaustive list of expenses that a franchisee may incur, as each franchise and franchisee is unique' (emphasis added). Further, the 'franchisor cannot estimate the expenses or outgoings of any franchisee or franchised business as these may vary widely between franchises and franchisees and are subject to a number of factors that are beyond the control of the franchisor' (emphasis added). Additionally, it adds that '[n]either the franchisor nor any other person gives any guarantees, warranties, or assurances in relation to the potential expenses or outgoings, if any, or targets for any particular store that a prospective franchisee is considering purchasing'. Further, that '[e]ach prospective franchisee must make their own detailed inquiries and investigations to potential sales, income, expenses and profitability …'. 4. The opening text box that forms part of Annexure 1 of the Code admonishes the prospective franchisee, amongst other things, to 'assess [their] own financial resources and capabilities to deal with the requirements of the franchised business', to 'make [their] own enquires about the franchise and about the business of the franchise' and to 'get independent legal, accounting and business advice before signing the franchise agreement'. In that context, the first text box in Sch 5 indicates that the 'assumptions are given to assist the franchisee's independent financial advisors to form their own view on the financial information and likely variances or additional costs in the context of the franchisee's specific circumstances' (emphasis added). 5. In substance, Mr Husseini contends that the range of establishment costs set out in items (b) and (c) of Table 1 in Sch 5 of the first Balcatta disclosure document were not predictions about the likely future costs that the Balcatta franchisee would incur to establish a particular franchise business at a particular location. The disclosure document warns (or disclaims) against using the costs stated in Table 1 in that manner. The document specifically records that the information in Table 1 is based on assumptions which will vary and, in substance, the particular establishment costs of particular franchisees will depend on, amongst other things, the specific circumstances of each franchise, existing assets of the franchise and local economic conditions and the suppliers. These matters include the individual characteristics of the franchisee, location and timing of the establishment of the business about which the franchisor self-evidently would have no knowledge at the time of creation of the disclosure document in compliance with the Code. The disclosure document also states, in effect, that it is not given with the intention that the prospective franchisee would rely on it as an estimate of the establishment costs for that franchisee, but rather 'to assist the franchisee's independent financial advisors to form their own view on the financial information and likely variances or additional costs in the context of the franchisee's specific circumstances'. 6. The primary judge found that the first Balcatta disclosure document conveyed representations that: 7. the total cost for equipment required to open and operate a UFG gym, whether that equipment was leased or purchased, was likely to be in the range of between $250,000 to $350,000, excluding GST, these being the lower and upper limits of the range: J [241], [270(2)(a)], [274]; and 8. the establishment costs for 'building construction and fit-out costs' would be $190,000 to $360,000 or approximately $300 per square metre: J [250], [270(3)], [278]. 9. The finding as to the equipment costs does not appear to be linked to any particular franchisee or franchise location. Except that the representation was qualified by the statement that the particular costs of any particular franchisee could vary from the amounts stated in Table 1, there is no error in the primary judge's description of the information conveyed about equipment costs. In the case of building, construction and fit-out costs, the primary judge's reasons do not define them by reference to a UFC Gym generally or specifically. Likewise, in the case of both equipment and building, construction and fit-out costs, to the extent these were considered to be predictions, the primary judge made no findings about the future period to which the predictions or estimates related. 10. In my view, the relevant items in Table 1 in the first Balcatta disclosure document taken in isolation but read in the context of that document as a whole do not convey a representation about the likely future equipment or building, construction and fit-out costs that the Balcatta franchisee specifically would incur if it entered into a franchise agreement with UFG. It conveys a more general representation about the range of costs to establish a franchise business based on current practice at the date of the disclosure document. It also conveyed the implicit representation that there were reasonable grounds for those general estimates. Subject to other contextual facts and circumstances, it would have been reasonable for the Balcatta parties to rely on the information represented in Table 1 to assist them, or their financial advisers, to form a view about the establishment costs that the Balcatta franchisee was likely to incur in its particular circumstances at the particular location at which it intended to operate the franchise business. 11. The primary judge found, in effect, that there were not reasonable grounds for the range of costs represented in the disclosure document. Therefore, the implicit representation that there were such reasonable grounds was misleading or, to the extent it was a representation as to a future matter, the representation is taken to have been misleading because evidence of reasonable grounds was not adduced. In either case, the disclosure document was objectively capable of leading to error in that it misrepresented that there were reasonable grounds for the statements about the range of establishment costs in Table 1. In short, while there may be room for debate about the precise characterisation of the representations conveyed in the first Balcatta disclosure document, no error has been demonstrated in the primary judge's conclusion, in effect, that the representations about the range of establishment costs were misleading because there were not reasonable grounds for those representations. Balcatta issue 2: Were Mr Husseini's misrepresentations, in context, misleading conduct? 1. The misleading representations Mr Husseini made to the Balcatta parties were not limited to the representations in the first Balcatta disclosure document. The primary judge also found that he made misleading representations during the Hyatt presentation, Skype meeting and Wetherill Park Gym tour. As already mentioned, the primary judge's findings about the Hyatt presentation and Skype meeting are not challenged. However, in the case of the Wetherill Park Gym tour, Mr Husseini contends that the primary judge erroneously found that Mr Husseini had represented that the Life Fitness equipment was included in the range of costs represented in Sch 5 Table 1 item (b). Balcatta issue 1: Wetherill Park Gym Tour 1. The Balcatta parties' case was that Mr K Girgis had asked Mr Husseini if the costs of the Life Fitness equipment were included in the startup cost estimate. Mr Husseini gave evidence that he responded with words to the effect: 'No, the fitout cost doesn't include the [L]ife [F]itness equipment. It will be an operating lease with Life Fitness so it is an operational expense.' Both Mr K Girgis and Mr S Girgis gave evidence to the effect that Mr Husseini had responded with words to the effect that he thought it was all inclusive but that the Balcatta parties should check with Mr Hagemrad: J [181]-[187]. There was evidence that Mr Hagemrad was subsequently asked if the costs of the Life Fitness equipment were included in the startup cost estimate: J [188]-[191]. The primary judge found that Mr Hagemrad had responded that they were included: J [192(b)], [247]-[248], [270(2)(c)]. 2. The primary judge's conclusion about what Mr Husseini said on 10 December 2016 was that 'on 10 December 2016, Mr Husseini said to Mr K Girgis and Mr S Girgis that he thought the Life Fitness equipment was already included in the amounts previously disclosed': J [192(a)]. In summarising his findings, the primary judge recast that conclusion as a representation conveyed 'on 10 December 2016 by Mr Husseini, that the Life Fitness equipment was included in the start-up costs previously sent through (in the First Disclosure Document)': J [270(2)(b)]. Neither of those conclusions is completely consistent with the primary judge's acceptance of Mr K Girgis' evidence that Mr Husseini said he was 'pretty sure it's all included in the costs we've sent through, but you should check with [Mr Hagemrad]': J [246]. Nonetheless, the primary judge went on to conclude that Mr Husseini's representation on 10 December 2016 'and the equivalent representation made by Mr Hagemrad shortly thereafter', were misleading in the sense that the amounts in item (b) of Table 1 of Schedule 5 of the first Balcatta disclosure document could not, at the time, in fact have covered both the Life Fitness equipment and the other equipment which would be required: J [369]-[370]. 3. Mr Husseini also contends that while the primary judge did not accept his evidence of what he had said to Mr K Girgis in response to his question about the Life Fitness equipment, later the primary judge concluded that it was possible that Mr Husseini had told Mr S Girgis that the Life Fitness equipment for Wetherill Park was treated as an operational expense either when Mr K Girgis was not present or where the statement was not properly digested by him: J [304]. Mr Husseini contends the primary judge's finding is inconsistent with an unequivocal concession Mr S Girgis made during his cross-examination that Mr Husseini had made the statement the primary judge concluded was possible. The 'concession' and the primary judge's assessment of the evidence was as follows: 186 Mr S Girgis gave the following evidence (at T223.46 – 224.8): Now, I'm going to – and while you were at Wetherill Park gym in Sydney on 10 December 2016, Mr Husseini said to you and your brother words to the following effect. He said, "The fit-out cost doesn't include the Life Fitness equipment. It will be an operating lease with Life Fitness, so it is not an operational expense." That's the case, isn't it?---Yes. I believe so. But an operational expense and fit-out costs or start-up cost are two different things. Well, can we – I'm just dealing first with what Mr Husseini said to you?---No problem. Do you accept that he said words to that effect to you at the Wetherill Park gym on 10 December 2016?---Yes. 187 A difficulty with the first question set out above was that two sentences of what Mr Hagemrad allegedly said were put to Mr S Girgis at once. I considered from the manner in which Mr S Girgis answered the first question that Mr S Girgis agreed that Mr Husseini had stated that the Life Fitness equipment was not included in fit-out. I was left in some doubt that Mr S Girgis intended to agree that Mr Husseini had stated that the Life Fitness equipment would be an operational expense. 1. Having regard to the primary judge's reasons and assessment of the evidence of all the witnesses and giving due respect to his conclusions and advantage in the assessment of the witnesses as the trial judge, I am not persuaded that his conclusion about what Mr Husseini said are glaringly improbable, contrary to the compelling inferences or incontrovertible facts or uncontested testimony. However, with respect to the primary judge, I have come to a different conclusion about the proper characterisation of the statements that the primary judge found Mr Husseini and Mr Hagemrad made to Mr K Girgis on 10 December 2016. 2. The statement the primary judge found that Mr Husseini made was qualified whereas the statement he found Mr Hagemrad made was not. Mr Husseini's statement was that he was 'pretty sure it's all included in the costs … but you should check with Maz'. That is not an unqualified statement about the start-up costs. It was a representation about Mr Husseini's state of mind 'he was pretty sure', but he was not so sure that he was prepared to say 'yes', rather he referred Mr K Girgis to Mr Hagemrad for confirmation that his understanding was correct. It was Mr Hagemrad who confirmed that the start-up costs included all equipment. Therefore, it was Mr Hagemrad and not Mr Husseini who made the relevant 'representation'. In my view, Mr Husseini's statement was not objectively capable of leading to an erroneous conclusion that Sch 5 Table 1 item (b) included the Life Fitness equipment. 3. It follows that I would uphold grounds A.5 and A.6, but not ground A.4 of the notice of appeal. As a consequence, I am of the view that there was no relevant conduct of Mr Husseini after the first Balcatta disclosure document was given to the Balcatta parties on 1 July 2016 that could be regarded as contributing to the characterisation of his individual conduct as misleading or deceptive or likely to mislead or deceive. Hyatt presentation and Skype meeting representations 1. The effect of the primary judge's findings was that Mr Husseini, by his silence, adopted and made representations on 19 January 2016 that a UFC Gym was likely to be able to be established for start-up costs in the range of $500,000 to $800,000 and, in context, those costs were intended and understood to include fit-out, all equipment, working capital and the franchise fee: J [235], [237], [270(1)(a)], [270(1)(b)], [322], [325]. Further, these representations were misleading because there were not reasonable grounds for making them: J [323], [326]. 2. The Balcatta parties were provided with the first Balcatta disclosure document after the Hyatt presentation and Skype meeting. That document represented that the range of costs to establish a UFC Gym franchise business. Relevantly, the range for equipment costs was $250,000 to $350,000 and the range for construction, remodelling, leasehold, improvements, decorating costs was $190,000 to $360,000. These parts of the establishment costs were $440,000 to $710,000 in total. The range for all establishment costs in Table 1 was $504,000 to $820,000 plus certain identified costs for which no specific amount was indicated. 3. The relevantly misleading nature of the representations made at the presentation, during the meeting and in the first Balcatta disclosure document was that there were reasonable grounds for the statements about the range of costs of establishing a UFC Gym franchise business. Mr Hagemrad's representations 1. Mr Hagemrad made representations about the establishment costs in an email of 16 July 2016. These were of a more definite character than the earlier representations. He said that for a 1,000 square metre gym, the fit-out costs 'would be in the range of $295,000 to $385,000' and equipment costs 'would be between $250,000 and $300,000' and start-up costs for fit-out and all equipment 'was likely to be between $545,000 and $685,000'. Also, that the 'best guess scenario for fit-out costs (excluding "flooring" and "AV") was in the range of $220 to $280 per square metre': J [256]-[258], [270(5)(a), (b)]. The primary judge found these representations were misleading because there were not reasonable grounds for them: J [336]-[347]. 2. Mr Hagemrad also conveyed representations in an email of 23 September 2016 that 'costings' for the Wetherill Park Gym were likely to be 'per … original estimations'; namely within the range of $500,000 to $800,000 which had previously been discussed between the parties: J [259], [270(5)(c)]. The primary judge found that representation was also misleading because there were not reasonable grounds for it: J [348]. 3. Next, as already mentioned, Mr Hagemrad misrepresented that item (b) of Table 1 included the Life Fitness equipment. That contributed to a misrepresentation that the establishment costs the subject of all previous representations and future representations included the costs of that equipment. 4. Last and most significantly, on 10 January 2017 Mr Hagemrad made representations in an email that in relation to Wetherill Park Gym, the total 'start up' or 'fit-out' costs (being all fit-out and all equipment) were $800,000 and those costs comprised: (1) the cost of weights, plates, and dumbbell, soft goods, UFC specific equipment including bag rack, Octagon and Everest was $200,000; and (2) the cost of fit-out, fixture, fittings, signage, branding etc was between $500,000 and $600,000. In context, that email represented that the Wetherill Park Gym costs were also likely to be the relevant costs for the Balcatta applicants to set up a UFC franchise gym in premises of 1,000 square metres: J [262]-[263], [270(5)(d)]. The primary judge found these representations were misleading because there were not reasonable grounds for making them: J [371]-[373]. Second Balcatta disclosure document 1. By no later than 15 February 2017 the Balcatta parties had been given the second Balcatta disclosure document. UFG was required to give the Balcatta franchisee that document in accordance with the Code. Although the primary judge found that the Balcatta parties had not read that document, it was given to them or their agent. The Balcatta parties had the benefit of waiting 14 days before entering into the agreement and a 7-day cooling off period. The document must form part of the objective context and circumstances. It is a document that, in the ordinary course of business, ought to have come to the attention of the Balcatta parties. It represented equipment, building, construction and fit-out costs in the range $600,000 to $950,000. However, the updated nature of the second Balcatta disclosure document was not drawn to the attention of the Balcatta parties. Further, it was provided on the day that the franchise agreement and guarantee were executed and at the end of a long period of communication between the parties. Notwithstanding the waiting and cooling-off period, in my view, without notice of the changes, it came too late in the day to form part of the context in which to characterise Mr Husseini's conduct. Mr Husseini's representations in context 1. The representations of Mr Hagemrad in July 2016, September 2016 and January 2017 are of a more specific nature than the general statements about establishment costs made during the Hyatt presentation, Skype meeting and in the first Balcatta disclosure document. Except as to the expression 'best guess scenario', Mr Hagemrad's representations were not qualified and were not qualified or disclaimed in the same way that the range of costs in the disclosure document are qualified or disclaimed. Also, the representations in September 2016 and January 2017 were representations about the specific costings for the Wetherill Park Gym. 2. Mr Hagemrad's conduct was not conduct of Mr Husseini and no findings were made to the effect that Mr Husseini had adopted or made the later representations of Mr Hagemrad. Nonetheless, the later representations of Mr Hagemrad tend to negate the misleading nature of the earlier representations because they provide updated and specific representations about establishment costs. The provision of updated information conveys an implicit statement that the earlier information is no longer reliable or, at the time of the later statement, there are not reasonable grounds for the continuing validity of the earlier statements about establishment costs. Mr Husseini's conduct 1. The primary judge concluded that 'after considering the representations in respect of establishment costs made in the context of the whole course of events' he was satisfied 'that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL': J [374]. Although the primary judge had examined the individual conduct of Mr Husseini and Mr Hagemrad and reached conclusions about the representations that each of them had made and the manner in which those representations were misleading, there was no specific conclusion or findings made regarding the manner in which Mr Husseini's conduct, as an individual, was misleading and contravened s 18 of the ACL (WA) or ACL (NSW). 2. When dealing with the question of reliance, the primary judge made findings to the effect that each of Mr Chau, Mr K Girgis and Mr S Girgis thought at the time of entering into the franchise agreement and the guarantees that the total for all fit-out and all equipment for a new UFC franchise in 1,000 square metre premises was likely to be around $800,000 and that the costs of the Life Fitness equipment were included in that estimate: J [298], [302], [303], [306], [307]. The primary judge also concluded that the Balcatta parties entered into the franchise agreement and guarantees because of the 'cumulative effect of the representations … assessed in the context of the whole course of conduct': J [314]-[315]. 3. Although addressed as a question of reliance, when the reasons are read as a whole, in my view, it is evident that the primary judge considered that the 'cumulative effect of the representations … assessed in the context of the whole course of conduct' not only had the subjective effect of bringing about the Balcatta parties' understanding of the likely establishment costs for a new UFC franchise in 1,000 square metre premises, but that was also the objective effect of those representations. The representations, as a collective, were misleading because there were not reasonable grounds for making any representations about the likely establishment costs. In that context, the representations made during the Hyatt presentation and Skype meeting and in the first Balcatta disclosure document contributed to both the subjective and objective cumulative effect of the representations: J [284], [298], [302], [303], [306], [307], [310], [314]. 4. Nonetheless, I do not consider that the findings the primary judge made were sufficient to sustain a conclusion that the misleading representations of Mr Husseini, as an individual, made in the context of the whole course of events, was conduct that was misleading or deceptive or likely to mislead or deceive: J [374]. Mr Husseini's misleading representations contributed to the whole course of events and to the conduct of UFG that contravened s 18(1) of the ACL, but it was not conduct that, separately and individually within the whole course of events, was objectively capable of leading the Balcatta parties to error. By the time that the Balcatta parties entered into the franchise agreement and guarantees, it was evident that there were not reasonable grounds for the statements about the establishment costs made in the first Balcatta disclosure document because those had been superseded, at least, by the later statements of Mr Hagemrad which he represented were based on the actual establishment costs of the Wetherill Park Gym. 5. I would uphold grounds A.1.a A.3.i of the notice of appeal. I would uphold the substance of ground A.2 to the extent that the Balcatta parties knew by 12 July 2016 that there were not reasonable grounds for the representations in the first Balcatta disclosure document about the general range of establishment costs of a UFC Gym franchise business. Balcatta issues 3 and 4: Was there reliance on Mr Husseini's representations? 1. Given the conclusions I have reached on the characterisation of Mr Husseini's conduct it is not strictly necessary to deal with the question of reliance. However, as it was fully argued and there is significant overlap between characterisation and reliance (causation) in the primary judge's reasons and the grounds of appeal, it is appropriate to address it. Primary judge's findings concerning the Balcatta parties' reliance 1. As has already been mentioned, the primary judge found that the misleading representations Mr Husseini made had contributed to the Balcatta parties' subjective understanding of the likely establishment costs of a UFC gym of 1,000 square metres. 2. Regarding the Hyatt presentation and Skype meeting representations, the primary judge said: 271 Any direct causative effect of representations made at the Hyatt presentation on 19 January 2016 and at the Skype meeting of 13 April 2016 about total establishment costs to the applicants entering into the franchise agreement and guarantees would have been diminished by later events. There was not any UFC franchise gym that had opened in Australia. UFG had not finally decided on equipment branding. The parties had many later communications based on information which later became available. 272 Notwithstanding, it is relevant that the highest figure mentioned for total establishment costs was $800,000 and this number persisted in the communications between the parties, although the various integers which comprised the amount of $800,000 altered over time. At the time of the Hyatt presentation, the amount of $500,000 to $800,000 included working capital and the franchise fee in addition to fit-out and all equipment. Later, the phrase "start-up costs" was being used to refer only to the fit-out and all equipment. 273 The representations made on 19 January 2016 and 13 April 2016 were relied on in the way identified at [314] below. 1. Regarding the first Balcatta disclosure document, the primary judge concluded that it contributed to the Balcatta parties' subjective understanding of the likely establishment costs in two ways. First, in combination with the misleading statement made at the Wetherill Park Gym tour, the disclosure document contributed to the Balcatta parties' subjective and incorrect understanding that establishment costs for equipment included the costs of the Life Fitness equipment: J [274]-[277], [304]-[310]. Second, the disclosure document contributed to the Balcatta parties subjective understanding that the total establishment costs were likely to be $800,000. But, the manner in which the primary judge concluded that the Balcatta parties relied specifically on the misleading representations in the disclosure document or Mr Husseini's individual conduct is not entirely clear from the reasons: J [278]-[281], [310]. 2. Significantly, regarding Mr Hagemrad's representations in his emails of July and September 2016 and January 2017, the primary judge said: 284 As discussed further below, the 16 July 2016 and 23 September 2016 emails were relied on in the sense that they were part of a broadly consistent narrative about the level of establishment costs for fit-out and equipment totalling around $800,000 as had previously been represented. The representations conveyed by these emails formed part of a course of conduct which led the Balcatta applicants to hold a view at the time they entered into the franchise agreement and guarantees that the likely upper limit of establishment costs would be around $800,000. 285 Mr Hagemrad's attachment to the 10 January 2017 email represented that the total "start up" or "fitout" costs for Wetherill Park was likely to be about $800,000, comprising the equipment identified in the email costing about $200,000 and "fitout, fixtures, fittings, signage, branding, etc" at between $500,000 and $600,000. 286 As discussed further below, I conclude that Mr K Girgis, Mr S Girgis and Mr Chau did not understand from Mr Hagemrad's response in the 10 January 2017 email that the total amount of $800,000 did not include the Life Fitness equipment. … 306 By the time they entered into the franchise agreement and guarantees, and because of the various representations which had been made over the course of their dealings with UFG, Mr Hagemrad and Mr Husseini, each of Mr K Girgis, Mr S Girgis and Mr Chau thought that the total cost of fit-out and all equipment would be in the order of $800,000. 307 On no occasion were they expressly told that the amount of $500,000 to $800,000 which had been discussed did not include the Life Fitness equipment. On no occasion were they told that the Life Fitness equipment was not included in Table 1 of Schedule 5 of the First Disclosure Document. … 309 I accept that when each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees, each acted on the basis that the total cost of fit-out would be about $600,000. They had consistently been told it was likely to be less than that until 10 January 2017 when it was represented to be about $600,000 in relation to Wetherill Park. They were told there were preferential agreements in place with suppliers. 310 The fact that the cost of fit-out had earlier been represented as less would have given them comfort in working with a maximum figure for fit-out of about $600,000. The representations which had been made before 10 January 2017 and in the First Disclosure Document would naturally be taken into account in assessing both the risk of fit-out costs exceeding $600,000 and in considering the amount by which it might be exceeded, if at all. 1. Ultimately, regarding the cumulative effect of all representations, the primary judge concluded: 314 I conclude that each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees because of the respondents' conduct, which included the making of each of the representations which I have earlier concluded were conveyed. I recognise that, at the point of entering into the franchise agreement and guarantees, some of the representations were relied on more heavily than others. Nevertheless, having regard to the cumulative effect of the representations, it is right to say that the Balcatta applicants entered into the franchise agreement and guarantees because of each of the representations, assessed in the context of the whole course of conduct. 315 In reaching these conclusions, I have taken into account the specific circumstances of each of Mr K Girgis, Mr S Girgis and Mr Chau and their differing levels of experience, referred to earlier. I have also taken into account their evidence, set out earlier, including in particular about reading the First Disclosure Document, in particular the "boxed" section in Schedule 5 and the "Important Note" at the end of that schedule. 1. While J [314] of the reasons suggest that the Balcatta parties entered into the franchise agreement and guarantees because of each of the representations assessed in the context of the whole course of conduct (that is, each representation, in context, was a material cause of the Balcatta parties entering into the transaction), I do not think that is the meaning the primary judge intended to convey. When read with the balance of the reasons, in particular J [314] and [315], the primary judge concluded that each of the representations contributed to the cumulative effect of all of them and the Balcatta parties' understanding of the likely establishment costs. Further, their understanding of the establishment costs and, implicitly that there were reasonable grounds for the estimate, induced the Balcatta parties to enter into the franchise agreement and guarantees. 2. As already mentioned, due to the formulaic nature of their evidence-in-chief the primary judge placed little, if any, weight on the statements in the affidavits of Mr Chau, Mr K Girgis and Mr S Girgis to the effect that they had relied on representations in the first Balcatta disclosure document: J [62]-[68]. Those statements were to the effect that: 'In deciding to enter into the Balcatta franchise agreement and agreeing to be a guarantor, I relied on: (a) the cashflow forecasts regarding the future income of the franchise; and (b) the forecast start-up and fit-out costs provided by Maz Hagemrad and Sam Husseini, as set out above in [Mr Girgis'] affidavit [dated 29 September 2020].' What was set out above in the affidavit was not reproduced in the primary judge's reasons and was not included in the appeal book, but I infer that it included references to the Hyatt presentation (J [71]), Skype meeting and first Balcatta disclosure document. In addition to the unreliability of the statements they are, in any case, conclusionary and lacking in content. The statement 'I relied on' does not, without more, provide an explanation, that can be tested or evaluated. It provides no factual foundation for the conclusion that the forecasts induced the witnesses to act as they did. Further, the witnesses' direct evidence of reliance is of the opportunistic kind that a court should be cautious to accept in the absence of other objective evidence of reliance. In any event, the primary judge's conclusions about reliance were not based on acceptance of the witnesses' evidence-in-chief, but inferences drawn from what they said during cross-examination and the documents tendered in evidence. 3. In substance, Mr Husseini contends that, to the extent that the primary judge concluded that the Balcatta parties relied on Mr Husseini's individual misleading representations, that conclusion was 'wrong' and the primary judge should have inferred from the facts found or uncontested that there had been no such reliance. Alternatively, Mr Husseini contends that the primary judge has not given adequate reasons for that conclusion. The Balcatta parties contend that the primary judge dealt with the relevant evidence and considerations in detail and exposed the 'route taken' to reach the conclusions expressed. Further, that the primary judge's findings as to reliance should not be disturbed as these were based on the primary judge's assessment of the credit of the witnesses and he has not palpably misused his advantage and the findings are not inconsistent with, or glaringly improbable, having regard to the incontrovertible evidence. Do the facts found or undisputed support a conclusion of direct reliance? 1. In my view, the primary judge's findings and conclusions about the Balcatta parties' reliance on the misleading representation were not sufficient to support a conclusion that the Balcatta parties entered into the franchise agreement and guarantees because of the misleading representations Mr Husseini made as an individual. Therefore, a critical link between the loss or damage the primary judge found that the Balcatta parties had suffered and the misleading representations of Mr Husseini was not established on the findings the primary judge made on the evidence. For the reasons which follow, in my view, the correct inference to be drawn from the facts as found or undisputed is that the Balcatta parties were not induced by any misleading conduct of Mr Husseini to enter into the franchise agreement and guarantees. Therefore, giving due respect and weight to the conclusions of the primary judge, I have come to a different conclusion. 2. The misrepresentations by Mr Husseini were not of a kind that were objectively likely to induce the representee to enter into the Balcatta franchise and guarantees. That is, the misrepresentations were not of a character where reliance or inducement could be inferred from the fact of the Balcatta parties entering into the Balcatta franchise agreement and guarantees. Nonetheless, inferences may be drawn from established facts which arise as a matter of common experience and knowledge. In this respect, it may be inferred that a prospective franchisee's decision to enter into a franchise agreement would be influenced by the franchisee's assessment of likely future income or profits, the likely costs of establishing the franchise business and the risk that actual future income will be less than estimated and (or) that actual establishment costs will be greater than estimated. The assessment of the relative risk would naturally affect the maximum estimated costs and minimum estimated income necessary for the prospective franchisee to commit to the venture. 3. Therefore, as a matter of common experience and knowledge, consistently with their affidavit evidence-in-chief, it may be inferred that the Balcatta parties' decisions to enter into the franchise agreement and guarantees were influenced by their understanding of: (1) estimated future income; and (2) estimated establishment costs; and (3) the risk that actual income would be lower and (or) actual establishment costs would be higher than estimated. It may be inferred that misleading representations about estimated establishment costs influenced their decision to enter into the franchise agreement and guarantees to the extent that the upper limit of that estimate was at the threshold of their risk tolerance. For example, Mr Chau gave evidence, which the primary judge accepted, that if he had seen the range of costs set out in the second Balcatta disclosure document, he definitely would not have entered into the transaction: J [312]-[313]. Nonetheless, while Mr Husseini's misleading representations had the potential to influence the Balcatta parties' decision to enter into the transaction in that way, it is highly improbable that Mr Husseini's silence and adoption of what Mr Hagemrad had said during the Hyatt presentation and the Skype meeting and his signature on the first Balcatta disclosure document induced the Balcatta parties to enter into the franchise agreement and guarantees about a year after the Hyatt presentation and six months after they were given the disclosure document. 4. As to the Hyatt presentation and Skype meeting, while Mr Husseini adopted Mr Hagemrad's representations, the source of the information was clearly Mr Hagemrad and not Mr Husseini. As for the first Balcatta disclosure document, as has already been mentioned, none of the statements in it are directly attributed to Mr Husseini. It is plain from the information contained in it that Mr Husseini had not had experience owning or operating a franchise business let alone a UFC Gym franchise in Australia or elsewhere. The Balcatta parties must be taken to have known that Mr Husseini was not the source of the representations about the establishment costs or, at least, to have doubted that he was the source or that he had any relevant knowledge or experience from which he could have estimated the establishment costs. 5. By contrast, the Balcatta parties had significant experience owning and operating gyms. Moreover, the evidence established that the Balcatta parties were not convinced that the establishment costs stated in the first Balcatta disclosure document was a reasonable estimate of those costs and that they made a decision in mid-July to hold off on the UFC Gym franchise business for a period of time. That is, the Balcatta parties did not believe there were reasonable grounds for the range of establishment costs represented in the first Balcatta disclosure document. 6. In an email from Mr Chau to Mr Hagemrad dated 12 July 2016 he said that he was 'a bit skeptical' about the establishment costs based on his experience of the costs of starting up a Jetts gym: J [168]. Mr Hagemrad replied with his email of 16 July 2016 which the primary judge found contained further misleading representations. 7. On 17 July 2016 Mr K Girgis sent an email to Mr Hagemrad in which he said that a decision had been made 'to hold off on the UFC Gym project for now', but they remained interested and would probably go ahead later in that year or early in the next. He also said: 'We don't believe we've done our due diligence up to scratch and given our current situation, it wouldn't be an intelligent business decision to rush into this.': J [172]. 8. During September 2016 the Balcatta parties re-engaged with Mr Hagemrad. The nature of their enquiries indicate that they remained unconvinced about the reasonableness of the establishment costs information with which they had been provided and they sought further information and assurances from Mr Hagemrad based on the actual costs UFG had incurred establishing and operating the Wetherill Park Gym. 9. On 23 September 2016 Mr Chau sent an email to Mr Hagemrad in which he indicated that they had been busy opening another F45 gym, enquired if there was an opening date for the Wetherill Park Gym and asked if there were 'any firm costings now that you guys are close': J [173]. Mr Hagemrad responded on the same day and made a further representation about establishment costs which the primary judge found was misleading. 10. On 10 December 2016 Mr K Girgis and Mr S Girgis had the Wetherill Park Gym tour at which Mr Hagemrad made further representations the primary judge found to be misleading about establishment costs including the Life Fitness equipment. As already mentioned, contrary to the primary judge's conclusions, Mr Husseini made no misleading statements on that day. 11. On 9 January 2017 Mr S Girgis sent an email to Mr Hagemrad and Mr Husseini raising a number of issues and questions. The email concluded with: 'Now that Wetherill Park is operational can we work out a more accurate cashflow and start up [costs] calculation. From discussions with your team, fitout now appears to be closer to 800k. Can you advise the allocation of these costs?': J [193]. Mr Hagemrad responded with his email of 10 January 2017 which the primary judge found contained further misleading representations about the establishment costs. 12. The primary judge found that the Balcatta parties' subjective understanding of the likely establishment costs at the time that they entered into the Balcatta franchise agreement was that the costs would be $800,000. That corresponded to the establishment costs Mr Hagemrad had represented in his email of 10 January 2017. Put another way, it is evident that Mr Hagemrad was the source of the estimate of establishment costs that informed the Balcatta parties' understanding of those costs shortly before they made their decision to enter into the franchise agreement and guarantees. It is also evident that the Balcatta parties did not believe that the range of establishment costs represented in the first Balcatta disclosure document were reasonable. It was not until representations had been made that were thought to be based on the actual costs that UFG incurred in establishing the Wetherill Park Gym that the Balcatta parties were satisfied that the information with which they had been provided about establishment costs was reliable. 13. Mr Husseini also contends that in the period between July and September 2016 the evidence established that the Balcatta parties undertook their own due diligence, but the Balcatta franchisee failed to disclose the full extent of those inquiries. Relying on Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 (Handley JA), Mr Husseini submits that the primary judge should have drawn the inference that the Balcatta parties feared to do so because evidence of that matter would have exposed facts unfavourable to them. In substance, Handley JA expressed the view in Ferrcom that the principles of Jones v Dunkel [1959] HCA 8; 101 CLR 298 may be extended to a case where a party fails to ask questions of a witness in chief (or re-examination) in circumstances that indicate 'as the most natural inference that the party fears to do so'. This fear is then 'some evidence' that such examination 'would have exposed facts unfavourable to the party'. But, where those circumstances arise, as in Jones v Dunkel where there is failure to call an available witness in a party's camp, an inference that the evidence of the witness would not have assisted the party or that examination on a topic would have exposed facts unfavourable to a party can only be taken so far. The Court cannot engage in speculation about what the evidence would have been if the witness had been called or if the witness had been examined on the relevant topic. It merely means that an inference may be more readily drawn against the party failing to call or examine a witness where it is to be expected that that witness would be able to give evidence to negate an inference that is otherwise available on the evidence. It does not mean that the Court must draw an inference against that party if the weight of the evidence, even with the inference of fear of unfavourable facts, does not support the drawing of that inference. 14. While Mr Husseini has identified a subject matter upon which the Balcatta parties could have given evidence-in-chief – the outcome of their due diligence process – but they did not, he has not identified what inference of fact he contends should be drawn more readily from the failure to examine the witnesses on that topic. It appears that Mr Husseini contends that the inference that the primary judge should have drawn was that the Balcatta parties obtained advice from another source or made an independent estimate of likely establishment costs, income or some other financial information that was favourable and that induced them to enter into the transaction. However, Mr Husseini has not identified any evidence or foothold in the findings of the primary judge that invites an inference to be drawn that the Balcatta parties relied on some sort of information or advice they obtained from another source to enter into the transaction. In my view, no error has been demonstrated in the primary judge's reasoning in this respect. The more significant matter is that an inference arises more directly from the Balcatta parties' conduct – putting the project on hold, undertaking due diligence making further enquiries and so forth – that they were not induced by the representations about establishment costs in the first Balcatta disclosure document to enter into the transaction. 15. Having regard to these matters, I consider it highly improbable and contrary to the inference that arises from the facts as found or undisputed that the Balcatta parties relied on the misleading representations of Mr Husseini, as an individual, to enter into the Balcatta franchise and guarantees. In my view, on the balance of probabilities, experienced gym operators such as the Balcatta parties would not have relied and did not rely upon Mr Husseini's representations by silence or by signature concerning the range of establishment costs for a new UFC Gym franchise made in January, April and July 2016 and those representations were no inducement to the Balcatta parties' decision to enter into the franchise agreement and guarantees in February 2017. 16. It follows that I would also uphold grounds A.1.b and A.3.ii of the notice of appeal. It is not necessary to address ground A.3A of the notice of appeal. For the reasons already given, irrespective of the adequacy or otherwise of the primary judge's explanation, the findings made were not sufficient to support the conclusion of reliance and I have concluded that on the facts found or undisputed, the Balcatta parties did not rely on Mr Husseini's representations. Blacktown Franchise 1. In the case of the Blacktown parties, the conduct of Mr Husseini was limited to signing the Blacktown disclosure document. As with the Balcatta parties, it is necessary to characterise the nature of the representations made in that document before considering whether, in context, Mr Husseini's conduct was misleading. Blacktown issue 1: Were misleading representations made in the Blacktown disclosure document? 1. Except as to the information regarding the franchisee, the franchise businesses and UFG or associate businesses and the range of establishment costs and other costs set out in the Tables in Sch 5, the Blacktown disclosure document was in materially the same terms as the first Balcatta disclosure document. It contained all the same information about the franchisor, Mr Husseini and Mr Hagemrad and, also, two additional directors (John Price and Jim Dimas) with franchising experience as Civic, Boost, Top Juice and Subway franchisees were identified. It contained the same text box on the first page as required by Annexure 1 of the Code and the same qualifying statements before and after the Tables in Sch 5. 2. Relevantly, cl 6.1 and cl 6.2 and Sch 1 identified two existing franchisees (one in New South Wales and one in Victoria) neither of which had commenced operations, but at that time, they were scheduled to commence in March 2017 and June 2017. Also identified was one business owned or operated by the franchisor or an associate in New South Wales (the Wetherill Park Gym). 3. Relevantly, in the Blacktown disclosure document (and second Balcatta disclosure document) Sch 5 Table 1 items (b) and (c) was as follows. Expenditures Description of payment Amount of the payment or the formula used to work out the payment To whom the payment is made When the payment is due Whether refundable; if so, under what circumstances … (b) Equipment, fixtures, other fixed assets Lease or purchase of equipment $300,000 - $500,000 Franchisor, Various other suppliers Prior to opening and upon purchasing Not refundable (c) construction, remodelling, leasehold investments, decorating costs Building, construction and fitout costs $300,000 - $450,000 Franchisor and Various contractors Prior to opening during building stage Not refundable … 1. The primary judge found that the second Balcatta disclosure document or the Blacktown disclosure document conveyed representations that: 2. the total cost for equipment required to operate a UFC gym, whether that equipment was leased or purchased, was likely to be, or would be, in the range of between $300,000 to $500,000: J [350], [424]; and 3. fit-out costs would be in the range of $300,000 to $450,000 (inclusive of GST): J [205], [362], [425]. 4. As with the first Balcatta disclosure document, the primary judge's findings do not appear to be linked to any particular UFC Gym and there is no specific finding about the future period to which the estimates or predictions about the range of establishment costs relate. In my view, the statements about the range of establishment costs in the Sch 5 Table 1 in the Blacktown disclosure document not taken in isolation, but in the context of the document as a whole, also do not convey representations about the likely future equipment or building, construction and fit-out costs that the Blacktown franchisee would specifically incur if it entered into a franchise agreement with UFG. It conveys general information about the range of costs to establish a franchise business based on current practices at the date of the disclosure document. It also conveys an implicit representation that there were reasonable grounds for representing the range of costs 'usually encountered by a new franchisee when establishing a franchised business based on current practice' albeit that the source of that information was limited to one franchise business and otherwise unidentified. 5. Subject to other contextual facts and circumstances, it would have been reasonable for the Blacktown parties to rely on the range of establishment costs to assist them, or their financial advisers, to form a view about the establishment costs that the Blacktown franchisee was likely to incur in its particular circumstances at the particular location at which it intended to operate the franchise business. The primary judge found, in effect, that there were not reasonable grounds for the range of costs represented in the disclosure document. Again, while there may be room to debate the way the primary judge characterised the representations, no error has been demonstrated in his conclusion to the effect that the representations in the Blacktown disclosure document about the range of establishment costs were misleading because there were not reasonable grounds for the estimated costs. Blacktown issue 1: Were Mr Husseini's representations, in context, misleading? 1. Although Mr Hagemrad had made representations about establishment costs on 21 October 2016, those representations were superseded by the provision of the Blacktown disclosure document to the Blacktown parties in late December 2016 or early January 2017. There were also earlier meetings at which representations were made about the likely future cashflows of the Blacktown franchise business, but those representations had no bearing on the representations about establishment costs in the disclosure document. No point was taken in the appeal to the effect that the representations in the disclosure document were not made by Mr Husseini or that merely by signing the document he had not conveyed or made any representation to the Blacktown parties (the document having been given to them by UFG). In these circumstances, there is no reason to disturb the primary judge's conclusion that Mr Husseini engaged in misleading conduct in contravention of s 18 of the ACL. 2. It follows that Mr Husseini has not demonstrated the primary judge made the errors alleged in grounds B.1.a and B.2.i of the notice of appeal. Blacktown issues 2 and 3: Was there reliance on Mr Husseini's representations? 1. The primary judge accepted that Mr Kim relied upon Sch 5 Table 1 items (b) and (c) of the Blacktown disclosure document as accurately reflecting the upper and lower limits of the total cost of equipment (whether leased or purchased) and the total cost of fit-out: J [437]. 2. Mr Kim had given the following evidence during his cross-examination: You knew that any income projections that had been prepared up to the sign – time of signing the agreement – you knew that they may or may not be realised. That's the case, isn't it?---Yes. You gave evidence earlier, Mr Kim, to the effect that you didn't understand any startup costs – any forecast startup costs to be telling you what the maximum actual costs would be. You gave evidence to that effect?---Yes. If that is the case, Mr Kim, then you must have known when you signed the franchise agreement that the actual startup costs could be larger than any forecasts that had been provided to you. That's the case, isn't it?---In any business like this, I understood that there would be a risk. I believe that risk to be somewhat small, given that ranges were provided, that they would be far outside that range. And in – and knowing that risk, Mr Kim, you were still prepared to sign the franchise agreement, correct?---Yes. … As a result of reading this disclosure document, Mr Kim, you knew that schedule 5 was not indicating what the startup costs would actually be. Is that correct?---I believe that it would be within that range or close to it. You knew that it was not guaranteeing to you that the establishment costs would be in any fixed amount. Is that correct?---I did not see it as a guarantee. And you understood that there could be variants in the actual startup costs to what was indicated in this document. Is that correct?---I assumed that the variants would be within the ranges provided. Mr Kim, at this time, no premises had been identified for the business which you proposed to set up. Is that correct?---The one that I eventually operated in wasn't. We had been looking at a few, and John Price had sent me a few that we were considering. And you knew that until – and you knew that any premises would have to be fitted out so that they could be carried on as a gym before the business started?---Yes. Is that correct?---Yes. And you knew that the actual cost of the fit-out would depend on the size, the age and the condition of the premises, correct?---Yes. And also, at the time that you read the disclosure document in January 2017, you knew that no timeframe had been indicated for when the fit-out work would commence?---That's correct, because the – no site had been confirmed. And you knew that the actual cost could be affected by economic – by the economic conditions at the time that the work was performed. You knew that?---I don't believe that I considered that. … Mr Kim, having regard to what you have just said in relation to no specific premises having been identified, you knew that it was not possible in January 2017 to indicate what the maximum actual startup costs would be?---I knew that at the time – that they were fitting out the Wetherill Park gym, because I had met Maz there and he had told me the reason we were meeting there, because they were in the process of constructing it. So my assumption was that as long as my premises was of a similar size, of a similar condition, that the prices would be estimated, well, based on what they knew on the gym that they were in the process of fitting out. I would assume that they would have known the building cost and received quotes at that time and that that was what they were providing me information based on. But whatever they provided you, you knew that it could be no more than an estimate?---By estimate, I would – sorry, I don't – what do you mean by an estimate? You knew that no one was assuring you or guaranteeing to you what the maximum actual startup costs would be?---Yes, I would agree with that. 1. The primary judge concluded: 438 Mr Kim did not see the upper limit as providing a guarantee, and acknowledged that there was a risk that the upper limit might be exceeded, but he nevertheless considered that it represented the likely upper limit. Mr Kim's assessment of the risk of the upper limit being exceeded was influenced by the course of his dealings with UFG, in particular with Mr Hagemrad and Mr Laurence. Further, Mr Kim's assessment of the consequences if the upper limit in respect of start-up costs were exceeded would necessarily have been affected by the income representations, including in particular net operating cash receipts of $587,213 indicated in the Revised Cash Flow. 1. The primary judge made no specific finding and reached no specific conclusion that the Blacktown parties relied on Mr Husseini's conduct as an individual. There is also no specific finding or conclusion that the Blacktown parties relied on the misleading representation about establishment costs to enter into the franchise agreement and guarantee. The express finding and conclusion of reliance in that respect is limited to reliance on the Blacktown revised cash flow estimate: J [433]. Nonetheless, it is implicit from the primary judge's conclusion that Mr Husseini engaged in misleading conduct in contravention of s 18 of the ACL and his award of damages that he also considered the Blacktown parties had relied on Mr Husseini's misleading conduct in a way that contributed to them entering into the franchise agreement and guarantee. 2. As with the Balcatta parties, the primary judge's findings about reliance were not based on Mr Kim's evidence-in-chief because that was unreliable. The findings are based on the evidence he gave during his cross-examination and the documents tendered in evidence. Mr Husseini contends that the primary judge's conclusions were wrong on the facts found or uncontested or otherwise, his reasons concerning reliance were inadequate. The Blacktown parties' response was substantially the same as the Balcatta parties' response to those contentions. Again, due to the nature of the asserted error and the primary judge's conclusions, it is open to this Court in an appeal by way of rehearing to reach a different conclusion to the primary judge. 3. In my view, the primary judge's findings and conclusions about the Blacktown parties' reliance on the misleading establishment costs representation were not sufficient to support a conclusion that the Blacktown parties entered into the franchise agreement and guarantee because of misleading representations Mr Husseini made as an individual. Therefore, a critical link between the loss or damage the primary judge found that the Blacktown parties had suffered and the misleading representations of Mr Husseini was not established in the findings the primary judge made on the evidence. For the reasons which follow, in my view, the correct inference to be drawn from the facts as found or undisputed is that the Blacktown parties were not induced by any misleading conduct of Mr Husseini to enter into the franchise agreement and guarantee. Therefore, giving due respect and weight to the conclusions of the primary judge, I have come to a different conclusion. 4. As with the Balcatta parties, Mr Kim's direct evidence about his reliance on the representations about establishment costs in the disclosure document was unreliable and, otherwise, conclusionary. Again, the misrepresentations were not of a character from which reliance or inducement can be inferred from the fact of entry into the Blacktown franchise and guarantee. However, for the reasons already given, it would have been reasonable for the Blacktown parties to rely on the Blacktown disclosure document to form their own assessment about the likely establishment costs that the Blacktown franchise would incur. In terms of assessing the likely establishment costs, the misleading representation was capable of leading to an error in that assessment because the risk that the actual establishment costs would exceed the upper limit of the range was greater than the disclosure document led a prospective franchisee to believe. 5. The findings of the primary judge reveal an appreciation that, as a matter of common experience and knowledge, estimated future income, estimated establishment costs and assessment of risk of the kind referred to earlier in these reasons, informed the Blacktown parties' decision to enter into the franchise agreement and guarantee. The misleading nature of the representations in the Blacktown disclosure document meant that the Blacktown parties were unaware of the full extent of the risk that the upper limit of the range of establishment costs might be exceeded. Mr Kim's assessment of the consequences of exceeding the upper limit would necessarily have been affected by the income representations because, assuming the income met expectations, Mr Kim would have had a reasonable margin for error in the estimated establishment costs. However, for similar reasons to those given in relation to the Balcatta parties, it is improbable that the Blacktown parties relied on Mr Husseini's misleading representations. 6. None of the representations about establishment costs in the Blacktown disclosure document are directly attributed to Mr Husseini and he does not expressly adopt them in the document. The disclosure document indicates that Mr Husseini has no relevant experience or knowledge of operating a franchise business or UFC Gym business. The single existing business is identified as that of UFG, as franchisor. Therefore, the evident source of information about establishment costs is UFG. 7. Mr Kim gave evidence that he had made an assumption that as long as his premises were of a similar size and condition as the Wetherill Park Gym, the Blacktown franchisee's costs would be within the range represented in the disclosure document. That assumption was contrary to the express disclaimer and qualifications in the disclosure document that warned that costs will vary depending on location and suppliers. There was no evidence that Mr Kim had identified a property, at the time the franchise agreement and guarantee was entered into, that fell within the assumed parameters. Thus, Mr Kim relied on his subjective interpretation of the disclosure document which was not consistent with the objective representations in that document as disclaimed and qualified. Additionally, information about the size and condition of the Wetherill Park Gym, that is the extraneous assumptions, was not contained in the disclosure document. Presumably that information was either obtained from Mr Hagemrad or from Mr Kim's observations as he had a meeting with Mr Hagemrad at the Wetherill Park Gym. Therefore, the parameters of Mr Kim's assumptions were not derived from information contained in the disclosure document or from Mr Husseini. These are firm indications that Mr Kim did not rely on the misleading representations (as qualified) in the Blacktown disclosure document. 8. It is also significant that the primary judge found that Mr Kim had relied on the Blacktown revised cashflow estimates at the time he entered into the franchise agreement and guarantee: J [433]. Mr Husseini was not involved in making the misleading representations in that document. The primary judge also recognised that the cashflow estimates would have affected Mr Kim's assessment about the risk of establishment costs exceeding the upper limit of the range represented in the Blacktown disclosure document: J [438]. 9. The effect of the primary judge's findings is that Mr Kim relied on the misleading representation in the disclosure document to inform his own assessment and judgment of what establishment costs the Blacktown franchisee would incur if it entered into the franchise agreement. That assessment and judgment was based, in part, on an assumption that, by selecting an appropriate site, the establishment costs would fall within the range represented in the disclosure document. Mr Kim knew and understood that there was a risk that establishment costs would exceed the upper limit of the range represented in the disclosure document for reasons that included the site at which the franchise business was established. Mr Kim was induced to enter into the franchise agreement and guarantee based on misleading representations as to the likely future income of the franchise business. Those misleading representations influenced Mr Kim's assessment of the risk that the upper limit of the range of establishment costs would be exceeded. That is, the misleading representations about future income of the franchise business had the effect of increasing Mr Kim's appetite to accept the risk that establishment costs may exceed the upper range represented in the disclosure document. Put another way, while the representations about establishment costs may have had an influence on Mr Kim's decision-making process, unlike the misleading representations about future income, the establishment costs representations were no real inducement for Mr Kim to enter into the franchise agreement or guarantee. 10. Mr Kim gave the following evidence during his cross-examination: The reason, Mr Kim, that you did not notify UFG that you were relying on any cash flow or revenue representations made by it was because when you entered into the franchise agreement, you were not relying on any cash flow or revenue representations made by UFG. That's the case, isn't it?---I disagree with that. You had made your own assessment of the likely financial performance of the business which you were planning to set up, and you relied on your assessment in relation to that. That's the case, isn't it?---I made my assessment on the information provided to me by Maz and Jason. And you also obtained accounting and business advice as you indicated in the franchisee certificate which you signed on 20 January 2017, correct?---Yes. And it was that accounting and business advice which you were relying on in deciding to enter into the franchise agreement. That's the case, isn't it?---No. Well, you're not saying that you did not rely at all on the accounting and business advice which you refer to in the franchising certificate. Is that correct?---No, I'm not saying that. 1. As with the Balcatta parties, Mr Husseini contends, relying on Ferrcom, that the primary judge should have inferred that Mr Kim feared giving evidence-in-chief (or in re-examination) about the substance of the accounting and business advice he received because it would expose facts unfavourable to the Blacktown parties. Here, Mr Husseini is on somewhat firmer ground because Mr Kim was cross-examined about his reliance on the accounting and business advice. Mr Kim's evidence in the quoted passage is ambiguous about the extent to which he relied on the accounting and business advice. The upshot of it is that he accepts that he relied on it to an extent, but not as the inducement to enter into the franchise agreement. But, again, the content of the accounting and business advice is a matter of speculation. Mr Husseini has not identified any evidence or finding of the primary judge from which an inference could be drawn that Mr Kim was induced to enter into the transaction by some information, advice or opinion expressed by any accounting and business advice he received about the establishment costs or financial viability of the Blacktown franchise. The primary judge summarised the evidence of Mr Kim and added: 'There was nothing in the contemporaneous documents to suggest significant reliance on that advice [of the accountant and business adviser] or to give content to it': J [432]. Mr Husseini has not demonstrated that the primary judge made any error in that assessment of the evidence or in failing to draw any particular inference of fact against the Blacktown parties because they failed to give evidence upon the topic of that inference. 2. Further, the topic of this passage of cross-examination is the likely financial performance of the franchise business. It is not establishment costs. That is of significance because Mr Kim was asked if he had relied on his assessment in relation to financial performance and he responded that he made his assessment 'on the information provided to him by [Mr Hagemrad] and [Mr Laurence]'. That is, the information they provided to him about the future financial performance of the franchise business. Put another way, the direct evidence of Mr Kim indicates that he relied on the projected financial performance and not establishment costs. 3. Having regard to the evidence referred to earlier and the primary judge's findings, it is highly improbable that Mr Kim was induced to enter into the franchise agreement and guarantee by Mr Husseini's misleading representation to the effect that there were reasonable grounds for representing that range of establishment costs encountered by new franchisees were as set out in Sch 5 Table 1 item (b) and (c) of the Blacktown disclosure document. To the extent that Mr Kim relied on that representation at all, it is more probable that he relied on the representations of UFG as the source or origin of the information. 4. I would allow grounds B.1.b and B.2.ii of the notice of appeal. It is not necessary to determine ground B.3A. For the reasons already given, irrespective of the adequacy or otherwise of the primary judge's explanation, the findings made were not sufficient to support the conclusion of reliance and I have concluded that on the facts found or undisputed, the Blacktown parties did not rely on Mr Husseini's representations. Castle Hill 1. As in the case of the Blacktown parties, with respect to the Castle Hill parties, the conduct of Mr Husseini was limited to signing the Castle Hill disclosure document. Castle Hill issue 1: Mr Husseini's misleading representations 1. On 23 August 2017 Mr Mirdjonov received from UFG a draft franchise agreement and disclosure document. The Castle Hill disclosure document was dated 27 April 2017 and was signed by Mr Husseini: J [515]-[516]. In September 2017 the Castle Hill franchisee entered into a franchise agreement: J [526]. 2. The primary judge found relevantly that the Castle Hill disclosure document conveyed a representation that the amount for building construction and fit-out costs was likely to be between $400,000 to $650,000: J [553]. The primary judge found that the representation was misleading because it was a representation as to a future matter and there were no reasonable grounds for making that representation because evidence to the contrary was not adduced and, in any event, because the evidence established that there were not reasonable grounds: J [591]-[593]. Mr Husseini does not challenge these conclusions in the appeal. Castle Hill issue 1: Were Mr Husseini's representations, in context, misleading? 1. The primary judge was satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL: J [594]. It is implicit, if not explicit, in that conclusion that the primary judge found that the representations in the Castle Hill disclosure document that he had earlier found to be misleading was misleading conduct on the part of Mr Husseini. Mr Husseini challenges that characterisation of his conduct. 2. The misleading representations in the Castle Hill disclosure document must be considered in the context in which the disclosure document was given to Castle Hill. The disclosure document is, of course, a document that UFG was required to give to Castle Hill under the Code before entering into the franchise agreement. Further, provision of the disclosure document came at the end of a process by which information and other representations about future income and establishment costs had been given to the Castle Hill parties by Mr Hagemrad and Mr Price and Mr Laurence (other agents of UFG). 3. On 12 June 2017 Mr Price represented that franchises for UFC gyms would be able to be established for start-up costs of approximately $1,000,000 to $1,200,000 depending on the site: J [537]. On 2 July 2017 Mr Laurence sent an email to Mr Mirdjonov attaching a financial model that included estimated start-up costs of $1,289,311.12. Excluding Life Fitness equipment, the estimate was $999,311.12: J [538]. On 7 July 2017 Mr Mirdjonov sent a financial model to Mr Laurence. It included estimated start-up costs of $1,522,711.12 and $1,232,711.12 excluding Life Fitness equipment: J [496]. On 10 July 2017 Mr Mirdjonov sent Mr Price an updated version of the financial model with materially the same start-up costs: J [503]. At a meeting on 20 July 2017, Mr Hagemrad endorsed the start-up cost in a financial model in the amount of $1,284,424.43. That amount excluded Life Fitness equipment: J [504]-[507], [550]. After the meeting, Mr Mirdjonov emailed Mr Price and Mr Hagemrad an updated financial model: J [508]. 4. Schedule 5 Table 1 of the Castle Hill disclosure document sets out the ranges of establishment costs. These total between $820,500 to $1,244,000 plus identified costs for which no amount was specified: J [520]. The range for item (b) (equipment) was $350,000 to $500,000. That range was less than the estimate for equipment in the financial model Mr Hagemrad endorsed on 20 July 2017: J [570]. The range for item (c) (building, construction and fit-out) was $400,000 to $650,000. That was consistent with the estimate of $600,000 for those items in the 20 July 2017 financial model that Mr Hagemrad had endorsed: J [571]. 5. The relevantly misleading nature of the representations in the Castle Hill disclosure document was that there were not reasonable grounds for the representations about the range of establishment costs. Therefore, the question for consideration is whether Mr Husseini's conduct (his misleading representations) was misleading or likely to mislead in the context and circumstances in which the Castle Hill parties had received information from Mr Price, Mr Laurence and Mr Hagemrad that was not entirely consistent with the information contained in the disclosure document. 6. In my view, in the context and circumstances, Mr Husseini's misleading representations were not capable of leading the Castle Hill parties into error. The relevant representations as to establishment costs were Mr Mirdjonov's estimate, no doubt developed in consultation with Mr Price and Mr Laurence and endorsed by Mr Hagemrad, of the costs the Castle Hill franchisee would incur establishing a franchise business. In the circumstances in which the disclosure document was given it was clearly not provided as a document for Mr Mirdjonov to use to assess or evaluate the particular costs that the Castle Hill franchisee would incur in establishing a UFC Gym franchise business. The financial model endorsed by Mr Hagemrad served that purpose. It follows that the misleading general and qualified representations about the range of establishment costs usually encountered by new franchisees were not capable of misleading Mr Mirdjonov regarding estimates of the particular costs the Castle Hill franchisee was likely to incur because those particular costs were the subject of specific estimates and representations made about them by Mr Hagemrad and others. 7. I would uphold grounds C.1.a and C.2 of the notice of appeal. Castle Hill issues 2, 3 and 4: Was there reliance on Mr Husseini's representations? 1. Having regard to the conclusions I have reached on the characterisation of Mr Husseini's conduct, it is not strictly necessary to address reliance. However, as with the Balcatta parties, the matter was fully argued and there is significant overlap in the grounds between characterisation and reliance, therefore, there is good reason to also deal with reliance. 2. The primary judge found that Mr Mirdjonov relied on the income, membership and performance representations conveyed in the financial model Mr Hagemrad endorsed on 20 July 2017 to agree to enter into the franchise agreement and guarantee: J [565]. The primary judge accepted that Mr Mirdjonov considered that the model reflected the 'reality of the situation at Wetherill Park' up to the point in time that the information was provided to him and a reliable forecast to the extent it related to the future: J [562], [565]-[568]. 3. The primary judge found that Mr Mirdjonov had not relied on the representation in Sch 5 Table 1 item (b) (equipment costs) of the Castle Hill disclosure document because the range in the disclosure document was lower than the estimate in the financial model endorsed on 20 July 2017: J [570]. However, his Honour found that Mr Mirdjonov had relied on Sch 5 Table 1 item (c) (building, construction and fit-out) because that range was consistent with the estimate in the financial model: J [571]. 4. As with the Balcatta and Blacktown parties, the primary judge made no specific finding and reached no specific conclusion that the Castle Hill parties relied on Mr Husseini's conduct as an individual. There is also no specific finding or conclusion that the Castle Hill parties relied on the misleading representation about establishment costs to enter into the franchise agreement and guarantee. The express finding and conclusion of reliance in that respect is limited to reliance on the financial model. Nonetheless, it is implicit from the primary judge's conclusion that Mr Husseini engaged in misleading conduct in contravention of s 18 of the ACL and his award of damages that he considered that the Castle Hill parties had relied on Mr Husseini's misleading conduct in a way that contributed to them entering into the franchise agreement and guarantee. 5. The parties made largely the same contentions as those made with respect to the Balcatta and Blacktown parties concerning reliance and inducement with respect to the Castle Hill parties. Again, in an appeal by way of rehearing, this Court may reach its own conclusion on those matters and in that way correct any error. 6. In my view, the primary judge's findings and conclusions about the Castle Hill parties' reliance on the misleading establishment costs representation were not sufficient to support a conclusion that the Castle Hill parties entered into the franchise agreement and guarantee because of misleading representations Mr Husseini made as an individual. Therefore, as with the Balcatta and Blacktown parties, the critical link between the loss or damage the primary judge found that the Castle Hill parties suffered and the misleading representations of Mr Husseini was not established in the findings the primary judge made on the evidence. For much the same reasons with respect to the Balcatta and Blacktown parties, in my view, the correct inference to be drawn from the facts as found or undisputed is that the Castle Hill parties were not induced by any misleading conduct of Mr Husseini to enter into the franchise agreement and guarantee. Therefore, giving due respect and weight to the conclusions of the primary judge, I have come to a different conclusion. 7. As with the Balcatta and Blacktown parties and for the same reasons, Mr Mirdjonov's affidavit evidence-in-chief concerning reliance was not reliable evidence, but inferences may be drawn from the established facts and evidence based on common experience and knowledge. Largely for the same reasons as those given concerning the Balcatta and Blacktown parties, it is improbable that the Castle Hill parties relied on Mr Husseini's misleading representations in the Castle Hill disclosure document. It is more probable that Mr Mirdjonov relied on UFG as the source of the information and representations in that document. 8. It is also highly improbable that Mr Husseini's misleading representations in the Castle Hill disclosure document were any real inducement for Mr Mirdjonov to enter into the franchise agreement and guarantee. The primary inducement were the income, membership and performance representations conveyed through the financial model Mr Hagemrad endorsed on 20 July 2017. That model included representations about start-up costs that Mr Hagemrad had also endorsed. The inference I draw is that Mr Mirdjonov relied on the income, membership and performance representations to enter into the franchise agreement and guarantee. It may also be inferred that he relied on the estimates of start-up costs in the financial model as a proxy for the purchase price for the new business. That is, the income, membership and performance representations influenced Mr Mirdjonov's willingness to commit capital of around $1.2 million toward the venture. His willingness to commit that amount of capital may also have been influenced by his understanding of the reliability of the establishment cost estimates Mr Hagemrad endorsed on 20 July 2017. It was not influenced by the general representations about establishment costs in the Castle Hill disclosure document that came after Mr Hagemrad's endorsement of Mr Mirdjonov's own estimate of establishment costs. 9. I would uphold grounds C.1.b, C.2 and C.4 of the notice of appeal. It is not necessary to address ground C.4A. For the reasons already given, irrespective of the adequacy or otherwise of the primary judge's explanation, the findings made were not sufficient to support the conclusion of reliance and I have concluded that on the facts found or undisputed the Castle Hill parties did not rely on Mr Husseini's misrepresentations. Damages 1. Having regard to the conclusions, I have reached on the other grounds of appeal it is not necessary to address the grounds relating to damages. Also, as mentioned earlier in these reasons, although there is authority for the proposition that loss or damage may, in an appropriate case, be limited to a discrete part of a claimant's loss or damage even though misleading conduct is a factual cause of all the claimant's loss or damage, such questions of causation and damage are not straight-forward conceptually, legally and factually and these matters were not fully argued in the appeal. In these circumstances, I do not consider it appropriate to deal with the damages grounds in this appeal. Disposition Balcatta parties 1. I would allow the appeal against the first to fourth respondents and make orders setting aside the judgment as against the appellant. Blacktown parties 1. I would allow the appeal against the fifth and sixth respondents and make orders setting aside the judgment as against the appellant. Castle Hill parties 1. I would allow the appeal against the seventh and eighth respondents and make orders setting aside the judgment as against the appellant. Costs 1. I would award the appellant his costs in the appeal, set aside the costs orders made against the appellant in the proceeding below but, otherwise, reserve and hear the parties on the question of what, if any, orders should be made concerning the appellant's and relevant respondents' costs in the proceeding below. It is unclear to what extent the appellant was actively involved in other aspects of the proceeding before the primary judge that were decided against UFG and Mr Hagemrad, including dismissal of cross-claims. Therefore, allowing for the possibility of some mixed success, it is appropriate to reserve and hear the parties on the question of the costs below. I certify that the preceding two-hundred and fifty-three (253) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate: Dated: 12 November 2024 SCHEDULE OF PARTIES NSD 551 of 2023 Respondents Fourth Respondent: PAUL CHAU Fifth Respondent: ACTIV HEALTH CLUBS PTY LTD Sixth Respondent: RICHARD KIM Seventh Respondent: ADVANCED CLUB MANAGEMENT PTY LTD Eighth Respondent: LAZIZ MIRDJONOV Ninth Respondent: ULTIMATE FRANCHISING GROUP PTY LTD ACN 607 187 860 Tenth Respondent: MAZEN HAGEMRAD