FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402 TRADE PRACTICES – exclusive dealing – whether the respondents had engaged in third line forcing – whether the offer of a "package deal" constitutes third line forcing – meaning of "services" – meaning of "artificially contrived arrangement" – meaning of "directly or indirectly" per s 47(6) the Trade Practices Act – participation in respondents' scheme dependent on purchase of an insurance policy INTERPRETATION – application of s 15 the Insurance Contracts Act 1984 (Cth) – whether an action for the contravention of ss 51AB and 52 the Trade Practices Act was barred by s 15 the Insurance Contracts Act – whether contract of insurance was "made the subject of relief under" the Trade Practices Act – meaning of "unconscionable" TRADE PRACTICES – unconscionable conduct – whether respondents had engaged in unconscionable conduct in contravention of s 51AB the Trade Practices Act – meaning of "unconscionable" – representations made for the purpose of inducing members of an Aboriginal community to enter into contracts of insurance sold by the respondents TRADE PRACTICES – misleading and deceptive conduct – whether representations made by respondents were misleading or deceptive – regard to be had to the class of persons to whom the conduct was directed – whether representations made as to future matters were not reasonably grounded – whether representations made as to future matters were not qualified or sufficiently qualified – whether misleading conduct designed to induce the opening of negotiations to purchase goods rather than the final purchase itself contravenes s 52 the Trade Practices Act – whether there was any reasonable prospect of the respondents being able to fund construction of the club and associated facilities as described by the respondents TRADE PRACTICES – misleading and deceptive conduct – liability of non–corporate respondents associated with the wrongful activities of the corporate respondents Trade Practices Act 1974 (Cth) ss 4(1), 4(10), 4C, 47(6), 47(7), 52, 52A (now 51AB) Insurance Contracts Act 1984 (Cth) s 15 Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 49 followed Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 applied Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495 applied KAM Nominees Pty Ltd v Australian Guarantee Corporation Ltd (1994) 51 FCR 338 distinguished Trade Practices Commission v Legion Cabs (Trading) Co–operative Society Ltd (1978) 35 FLR 372 not followed West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620 considered Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 at 463 cited Hurley v McDonald's Australia Ltd (2000) 22 ATPR 41–741 at 40,585 – 40,586 cited Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 considered Blomley v Ryan (1956) 99 CLR 362 considered Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40–940 cited TEC & Thomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38 considered Stuart Alexander & Co v Blenders Pty Ltd (1981) 3 ATPR 40–244 considered SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14 discussed and applied Trade Practices Act Review Committee (Chair: TB Swanson), Report to the Minister of Business and Consumer Affairs (1976) J Lipton, Third Line Forcing in Australia: Current Problems and Future Directions (1996) 4 TPLJ 77 Report by the Independent Committee of Inquiry (Chair: FG Hilmer), National Competition Policy Review (1993) AGPS, Canberra The Macquarie Dictionary, 3rd ed N Seddon et al, Cheshire & Fifoot's Law of Contract, 7th Aust ed (1997) Butterworths, NSW AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION), LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION), SAMSON NEIL BACKO, DAVID JOHN IVERS, LUKE VINCENT IVERS, JOHN LINDSAY IVERS, LANCE THOMAS STONE, MICHAEL JOHN McLEAN, WILLIAM ANTHONY MUSGRAVE, ROBERT COWLEY AND GLENN JAMES IVERS QG 175 OF 1993 DRUMMOND J BRISBANE 5 APRIL 2002 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 175 OF 1993 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION) FIRST RESPONDENT LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION) THIRD RESPONDENT SAMSON NEIL BACKO FOURTH RESPONDENT DAVID JOHN IVERS FIFTH RESPONDENT LUKE VINCENT IVERS SIXTH RESPONDENT JOHN LINDSAY IVERS SEVENTH RESPONDENT LANCE THOMAS STONE EIGHTH RESPONDENT MICHAEL JOHN McLEAN NINTH RESPONDENT WILLIAM ANTHONY MUSGRAVE TENTH RESPONDENT ROBERT COWLEY ELEVENTH RESPONDENT GLENN JAMES IVERS TWELFTH RESPONDENT JUDGE: DRUMMOND J DATE OF ORDER: 5 APRIL 2002 WHERE MADE: BRISBANE THE COURT DECLARES THAT: 1. In so far as any of the respondents engaged in the conduct alleged in pars 19 and 20 of the applicant's Further Further Amended Statement of Claim filed 6 October 1999, they did not thereby engage in exclusive dealing in contravention of s 47 the Trade Practices Act 1974 (Cth). 2. In so far as any of the respondents engaged in the conduct alleged in pars 36 and 37 of the applicant's said pleading, they did not thereby engage in unconscionable conduct within s 51AB the Trade Practices Act 1974 (Cth). 3. The first, the third to tenth and the twelfth respondents, by representing on 8 September and 16 September 1993 that finance had been approved for the first respondent's development referred to in the statement of claim, engaged in conduct that contravened s 52 the Trade Practices Act 1974 (Cth). 4. In so far as any of the respondents engaged in the conduct alleged in par 22(b)(i) of the applicant's said pleading, they did not thereby contravene s 52 the Trade Practices Act 1974 (Cth). 5. None of the respondents engaged in the conduct alleged in pars 22(b)(ii) and (iii) or 23 of the applicant's said pleading. 6. The first, the third to tenth and the twelfth respondents, by making between July 1992 and September 1993 the representations as to the commencement and completion of the development referred to in par 24(a) and the representations that the completed development would have the attributes referred to in par 24(b) and the representations as to the worth of the completed development referred to in par 28(a) of the applicant's said pleading, engaged in conduct that contravened s 52 the Trade Practices Act 1974 (Cth). 7. The first, the third to tenth and the twelfth respondents, by making representations in the period between July 1992 and September 1993 in respect of shares to be issued in the public company to be formed by the first respondent and/or in the third respondent in par 21 of the applicant's said pleading, engaged in conduct in contravention of s 52 the Trade Practices Act 1974 (Cth). 8. In so far as any of the respondents engaged in the conduct alleged in pars 25(a) and (c) and 26(a) of the applicant's said pleading, they did not thereby engage in conduct that contravened s 52 the Trade Practices Act 1974 (Cth). THE COURT ORDERS THAT: 9. The issue of costs be adjourned to a date to be fixed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 175 OF 1993 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION) FIRST RESPONDENT LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION) THIRD RESPONDENT SAMSON NEIL BACKO FOURTH RESPONDENT DAVID JOHN IVERS FIFTH RESPONDENT LUKE VINCENT IVERS SIXTH RESPONDENT JOHN LINDSAY IVERS SEVENTH RESPONDENT LANCE THOMAS STONE EIGHTH RESPONDENT MICHAEL JOHN McLEAN NINTH RESPONDENT WILLIAM ANTHONY MUSGRAVE TENTH RESPONDENT ROBERT COWLEY ELEVENTH RESPONDENT GLENN JAMES IVERS TWELFTH RESPONDENT JUDGE: DRUMMOND J DATE: 5 APRIL 2002 PLACE: BRISBANE REASONS FOR JUDGMENT 1 In this action, the Australian Competition and Consumer Commission ("the Commission") seeks relief against all save the second, eleventh and thirteenth respondents in respect of the making of certain representations alleged to contravene s 52 (and related provisions) the Trade Practices Act 1974 (Cth) ("the TPA") and conduct said to contravene the third line forcing provisions of s 47 of that Act. 2 The action arises out of an ambitious scheme for the development of a sporting and entertainment venture to be established in Logan City in the 1990s. The first respondent, The IMB Group Pty Ltd ("IMB"), actively promoted the scheme from early 1991 to 20 September 1993, when Legal and General Life of Australia Ltd ("Legal & General") instructed IMB to immediately stop selling its policies: that was soon after IMB had received adverse publicity in the media and three days after the Commission had taken action against it. 3 The moving spirits in devising and promoting this scheme were Mr David Ivers, a director of IMB and fifth respondent, and Mr Glenn Ivers, an agent of IMB and twelfth respondent. Each of the fourth and sixth to tenth respondents, the Ivers' relatives and business associates, played a part in IMB's activities. The eleventh respondent, Mr Robert Cowley, played a leading part in promoting the scheme from about mid 1992. He was last known to be in Australia in about September 1993: he has taken no part in the proceedings. Proceedings between the Commission and the thirteenth respondent, Legal & General, were settled a little while after the action was brought. The Commission brought separate proceedings against the National Mutual Life Association of Australasia Limited ("National Mutual") in respect of its involvement in the events that have given rise to this litigation. Those proceedings, after consolidation with these, also were settled. The second respondent, Redbeak Pty Ltd, was set up at the instigation of Mr Graham, a Commission witness, who was closely associated with the IMB respondents from early 1992 until that association was terminated in late 1992. Redbeak Pty Ltd was dissolved in circumstances not revealed by the evidence. 4 The third respondent was incorporated in June 1993. It was to be the corporate vehicle for the rugby league team called "The Logan Lions", which the other respondents intended would be a member of the anticipated national rugby league competition, and for the management of the entertainment and sporting club development to be built around this rugby league team. The background to the IMB Scheme 5 In the latter part of the 1980s and early 1990s, Glenn Ivers was in business selling insurance policies, including investment policies, as agent for various life insurance companies. In 1990, Glenn and David Ivers put a proposal to a Logan City rugby league club, the Scorpions, which was in financial difficulties, to assist the club by selling investment policies to club members and paying to the club about 20 percent of the commissions the Ivers would receive from the sale of those policies. It was in the course of discussions about this proposal with club representatives that the Ivers got the idea of forming a syndicate for the purpose of entering a team in a national rugby league competition and developing a sporting and entertainment project centred on that team. At that time, it was widely expected that a national rugby league competition would evolve during the 1990s from the activities of the New South Wales Rugby League. It was also then anticipated that, with the recent change of government, poker machines, long banned in Queensland, would become lawful and so open up a lucrative source of income to sporting clubs and other organisations. In the "2001 Rugby League Syndicate" document produced by the IMB respondents and dated 22 July 1991, "[t]he introduction of poker machines in Queensland and the massive population concentration around Meakin Park" were given as the "key factors in the decision to base [IMB's] bid in Logan City", ie, IMB's planned bid to enter a Logan City team in the national rugby league competition. 6 The Ivers acquired the first respondent in late 1990 and, by early 1991, had arranged for it to enter into an agency agreement with National Mutual. Integral to the scheme was the sale by IMB to persons wishing to participate in the scheme of investment policies issued by National Mutual between about March and November 1991 and thereafter, until September 1993, by Legal & General. A total of about 3,200 policies were sold by IMB. 7 In early February 1991, IMB was generating media publicity about its plan to develop the Scorpions Rugby League Club to the point where IMB could lodge a bid for the entry of a Logan City team into the national competition. From about March/April 1991, the first respondent promoted investment in the scheme through the purchase of National Mutual policies. 8 The development planned by IMB was modelled on the Penrith Rugby League Club in New South Wales and its team, the Penrith Panthers. From the outset, presentations by the respondents to the public explaining the proposed project relied on comparisons between the scheme and the highly successful Penrith Rugby League Club, then a far larger club (50,000 members in 1991) than anything in the Logan City area (the largest club then having 500 members). 9 The success of the Penrith club was attributed in large part to: "… one of the Rugby League industry's biggest trumps, poker machines. Penrith Leagues Club generates a huge percentage of its profits from its army of pokies and that capital has allowed the club to build facilities which are the envy of the Rugby League world. … Quite simply Penrith provides the complete entertainment package done in style for the whole family." [National Mutual video shown in September 1991] 10 The National Mutual video stated that "with poker machines now set for certain introduction in Queensland, the time is right for Logan City to achieve similar results [to those achieved in Penrith]". The Logan City area was seen as having similar socio–economic and demographic characteristics as the Penrith catchment area. Publicly available information shows that the area was projected to experience rapid population growth, from around 400,000 to over 550,000 within a 15 kilometre radius of Meakin Park by 2001. 11 The respondents' scheme developed and changed in its details over time. But throughout, the scheme depended upon the respondents selling sufficient policies to generate the funds necessary to implement the scheme in the various forms it took throughout the 1991 to 1993 period. The respondents' initial idea was that the policies would be able to generate that finance as the value of the individual policies increased over time: National Mutual was prepared to make loans to policyholders against their policies, depending on their value from time to time. So was Legal & General. Later, from about the time Cowley became involved in mid 1992, the policies came to be seen by the respondents as a means of raising finance from external lenders because of the security they were thought to offer (together with the additional security over the project assets that would become available as development of the project proceeded). Of the total of about 3,200 policies sold by IMB in the period between March 1991 and September 1993, 456 were National Mutual policies and the rest were Legal & General policies. Most of the policies were purchased as a result of people attending seminars conducted by IMB, although some were sold as a result of door–to–door canvassing and telemarketing. Seminars were conducted at IMB's premises in Springwood in Logan City from early 1991 to September 1993; towards the end of that period, IMB had over 100 full time employees and the seminars were attracting up to 800 people a week. 12 An outline of the scheme pretty well as it was originally envisaged is contained in the document "2001 Rugby League Syndicate", which Glenn Ivers said was produced around May 1991 to give to National Mutual. He acknowledged that this document may also have been given to some persons who bought policies about the time. This document identified the objectives of the syndicate as being "[t]o enter a Logan City Rugby League Team into the National Competition in the Year 2001" and "[t]o build a successful business around Rugby League in Logan City over the next ten years and beyond". It proposed the construction at Meakin Park of a three stage project ultimately comprising a football stadium and leagues club and an international hotel and country club. Stage 1 was to be constructed in 1994, at a cost of $10,000,000; Stage 2 in 1997, at a cost of $25,000,000 and Stage 3 in 2001, at a cost of $90,000,000. The document states: "The entire $125 million Development will be owned outright by 5,000 shareholders, each holding 25,000 $1.00 ordinary shares". Funding was to be generated by "[e]ach of the 5,000 Shareholders [contributing] $25.00 per week into an investment policy in their own name with National Mutual contributions are C.I.P. Linked … Loans backs against the accumulation in this policy fund each individual share purchaser over three stages". A table in the document indicated that each policyholder would be able to obtain loans against their policy to fund a $2,000 share purchase in 1994, a $5,000 share purchase in 1997 and an $18,000 share purchase in 2001. A comment following this table stated: "It should be noted that the above figures are not guaranteed, they are estimates only based on particular earning rates which such rates may or may not be maintained and depend of course upon future investment experience". 13 The "Members Information Portfolio" document of January 1992 describes the share purchase arrangement in more detail. Whereas the May 1991 document referred only to investors purchasing shares from their policy loans, the "Members Information Portfolio" described in some detail the element of the proposal involving the formation of a public company to undertake development of the scheme with policyholders having the opportunity to subscribe for shares in that company at each stage of the development "over a projected ten year period". 14 Cowley joined IMB in about March 1992. Sales of policies had not achieved the numbers IMB had hoped for – only 456 being sold to November 1991. By late July, the respondents, acting on Cowley's advice, had decided to reduce the original number of syndicate members from 5,000 to 2,000 and to seek funding by means of what was described by Cowley as a private placement or loan funds to enable Stage 1 of the scheme to be completed by 1994. In an interview published in the Albert & Logan News on 24 July 1992, David Ivers, as Managing Director of IMB, was quoted as saying that IMB had realised that a change in direction was needed because, after two years, it had only been able to sign up about 1,200 investors and that the syndicate would be limited to 2,000 instead of the 5,000 originally planned and IMB would resort to a public float to fund the project. 15 Cowley was an effective salesman: he established the field interviewing division of IMB which ultimately ended up with upwards of 800 people a week coming to seminars. Sales of policies increased substantially. Cowley also held himself out to IMB (and Legal & General) as experienced in corporate finance; he claimed he had arranged finance for numerous projects throughout Europe. 16 Cowley, who spent much time overseas from about July 1993 seeking to find a financier for the project, was last seen in Australia in September 1993. The respondents first conceded that Cowley was a fraud at the end of the Commission's opening address. 17 Soon after Cowley joined there were significant changes not only to IMB's plans for financing the project, but to its sales procedure as well. From July 1992, it was represented to those attending seminars that the project would be funded from borrowings or a "backer" taking shares. The number of policyholders to be signed up was reduced. 18 IMB continued selling the policies up to 20 September 1993, when they were instructed by Legal & General to "cease immediately selling any Legal & General life policies at or immediately after the seminars you have been holding to promote the Logan Lions Football Club". The audience to which the scheme was pitched 19 The target market is conveniently described in the respondents' "2001 Rugby League Syndicate" document [Ex C8 tab 2], produced either in late 1991 or, more likely, in early 1992. It describes the syndicate as "a concept designed to give the average working person the opportunity to participate in a major sporting, recreational and leisure development". It also states that: "the target for the club should be the 'middle Australian Family' … It should be the place where the community comes for recreation – in this case, that community is very much 'mum, dad and the kids' in the middle to lower socio–economic group." 20 In determining the likely effect of the conduct that is alleged to be misleading or deceptive, it is necessary to have regard to the class of person likely to be exposed to that conduct. This class can be identified in general terms as residents of the Logan City area possessing the characteristics referred to in this "2001 Rugby League Syndicate" document. Some marketing occurred further afield, in Rockhampton and Moranbah in central Queensland (in about March 1992), in the Camu Aboriginal Community in far North Queensland (in about July 1992) and in parts of New South Wales, though most activity was concentrated in Logan City. But, as the evidence in this case demonstrates, it is wrong for the Court charged with determining whether conduct contravenes the provisions of s 52 the TPA to assume that the class of persons likely to be exposed to the relevant conduct fits some homogeneous stereotype conveyed by expressions such as "mum, dad and the kids in the middle to lower socio–economic group". As Hill J said in Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 49: "In the end, the question is not whether account is to be taken of the effect of the conduct upon the gullible, but whether the conduct in question is misleading or deceptive." 21 The IMB witnesses (and the Commission witnesses also) who attended IMB sales seminars, most of whom bought policies, came from a variety of backgrounds. They included tradesmen, clerks, teachers, a psychologist, a full–time university student, a social worker, pensioners, semi–skilled workers, people in lower–level management positions and people self–employed in a variety of unskilled and semi–skilled occupations. While many of IMB's witnesses would not, I expect, reject the description of being "average working persons", those who gave evidence to the respondents, who had almost all bought policies, presented, with a relatively small number of exceptions, as intelligent people, not apparently overly suggestible. Though a minority at trial did not have a very good understanding of the structure of the scheme as presented to them by those acting for IMB, most did. Many gave pretty convincing evidence that they were aware there were risks in respect of various elements of the scheme. CHRONOLOGY March/April 1991 IMB commences to solicit members of the public, in personal interviews and at seminars, to invest over a ten year period in a rugby league football team to enter the Sydney Rugby League Football competition by the year 2001 and a sporting complex at Meakin Park through a National Mutual savings plan. 15.5.91 After a meeting between Mayor Golledge, Deputy Mayor Alderman Ayling and Alderman Lutton of Logan City Council and David Ivers, Glenn Ivers and Backo of IMB, the Deputy Mayor gives a letter to IMB recording that IMB "will be given first option on the use of the area currently covered by the sewerage treatment plant" in Meakin Park subject to "certain performance criteria", viz, "that their proposed development is built in stages and is proved effective". The letter also states that: "Upon presentation of the final concept plans formally to the Council, I believe that the IMB Group will be given a favourable hearing and the appropriate decision for a lease over areas not included in the treatment plant area will be forthcoming." In oral evidence, Deputy Mayor Ayling said that "the performance criteria" referred to in the letter also included IMB satisfying the Council "that it was not just a profit–making situation for a number of people, but … there was direct benefit back to the community at all times, not just for the sport of rugby league, but for all sports and community organisations." 23.5.91 Advice of McCullough Robertson sought by IMB prior to the commencement of marketing the syndicate. Advice formed the basis of IMB's offer to members of the public throughout 1991 – 1993. 28.5.91 Kendalls KBM, Chartered Accountants, preliminary financial analysis prepared for IMB. This analysis, based on several assumptions, the principal one being "proposed attendance figures", and the author's knowledge of the entertainment industry in Australia, gave projections from net profit from a retail centre comprising bars, restaurants and poker machines which would complete a full year of trading in 1995, a sports and entertainment centre which would complete its first full year of trading in 1998 and a football stadium which would complete its first full year of trading in 2002. Kendalls recommended that IMB engage a specialist organisation such as the International Feasibility Corporation Pty Ltd ("IFC") to undertake a further feasibility review. 3.7.91 Informal approaches made to Logan City Council on behalf of IMB in relation to the proposal to develop a sporting complex and IMB is invited to make a formal submission for the development of Meakin Park. 18.7.91 Ken Arthurson, Australian Rugby League Chairman, wrote to IMB, subsequent to a meeting in Sydney with IMB, expressing the ARL's qualified support for IMB's proposal to enter a Logan City team in the national competition. July 1991 Michael McLean, ninth respondent, loans a sum of $147,661.00 to IMB. 21.11.91 National Mutual commissioned Coopers & Lybrand to conduct an independent investigation of the syndicate funding concept. Coopers & Lybrand report is favourable to IMB. November 1991 National Mutual limits its involvement with IMB to 600 policies. 12.12.91 Letter from Mayor Golledge, setting out the Council's general support for the IMB concept. December 1991 IMB is appointed agent of Legal & General, recruited by Bill Graham. 17.12.91 IMB corresponds with members of Sam Backo's family in Vanuatu regarding a proposal to develop, as part of IMB's scheme, a resort there, this being the only approach to any authority in Vanuatu regarding this proposal. 27.12.91 Legal & General Umbrella Financial Plan Summary prepared by Bill Graham for IMB indicating that at an interest rate of 8%, cash value at the end of twelve years would be $28 451. Quote used as the basis for the "share purchase schedule" in the "Members Information Portfolio". Early 1992 to mid 1992 IMB distributes "2001 Rugby League Syndicate Members Information Portfolio" [Ex C8 tab 15] to audience members at sales seminars and promotions. 24.1.92 IFC feasibility study sent to IMB. 31.3.92 IMB's 2001 Rugby League launch held at Beenleigh Rum Distillery. In the presence of 400 guests, IMB presents its Logan Lions submission to Mr Arthurson. Extensive media publicity. 11.5.92 Arthurson writes to IMB stating that IMB's submission appeared to conform with guidelines for entry and would receive serious consideration. May 1992 IMB commissions advertising company to produce a marketing plan for the syndicate. "Logan Lions" team name selected on advice of IMB's marketing consultant, Adentity Pty Ltd. May/June 1992 IMB engages Robert Cowley in a managerial capacity. 27.7.1992 IMB announces that a public float of shares will be released and that the original number of syndicate members will be reduced from 5,000 to 2,000. October 1992 IMB distribute a newsletter entitled "Lions Roar" containing the following statement: "Work on the magnificent multi–million dollar Logan City Sporting Complex planned for the Meakin Park site will get underway in mid–1993 if corporate finance negotiations proceed as planned, project directors, the IMB Group, has said. IMB Managing Director, David Ivers, said the intention now was to proceed with capital raising for the complex via a public float with 1,300 of the originally planned 5,000 founding members having already taken up the option to join. 'The original target of 5,000 was too unrealistic in terms of the initial time frame we had set and to enable building to start in 1993, we have decided to reduce the local content to 2,000 and to go to the public for Stage One,' Mr Ivers said." 1.10.92 IMB submits a business plan disclosure document for an agreement in principle for the lease of Meakin Park [Ex C8 tab 26] to the Mayor of Logan City. Document prepared by Cowley with assistance from IMB directors. The document identifies the principal avenue for funding is "to seek Legal & General's agreement to take an equity position through a private placement … Meetings are planned with Legal & General's Board late October …" 22.10.92 Legal & General learns of this suggestion and State Manager, Mills, writes to IMB requiring removal of any suggestion of current or future financial support from Legal & General for proposal from a redrafted presentation to the Council, since "this scenario has never been considered or discussed in the past and is unlikely to be in the future". November 1992 About 1,200 policies sold to date. 17.11.92 Bill Graham resigns from Redbeak Pty Ltd, the Legal & General master agency through which IMB was agent for Legal & General, and severs his connection with IMB. [From February 1992 until this time, no preparation of plans for the proposed development or engagement or liaison with consultants or builders in regard to it is conducted by IMB.] 26.11.92 IMB representatives attend a Logan City Council Finance Committee meeting to discuss business proposal of 1.10.92. After meeting, IMB instructs Sydney–based accountants to begin formulation of the Town Planning Application and senior partner of the accounting firm flies into Brisbane for meetings with Council officers and IMB representatives. 2.12.92 The Council by letter advises IMB to make a formal submission to the Council regarding the project "seeking approval in principle in the first instance". The Council's Finance and Policy Co–ordination Committee had met with IMB representatives on 26 November and the project was considered by the Council at its meeting of 1 December. April 1993 IMB distribute a second edition of its newsletter entitled "Lions Roar". [Ex C8 tab 29] April 1993 Deputy Mayor Ayling and Mayor Golledge decide to recommend to IMB and to the Council that Logan Park should be the preferred site for the development, rather than Meakin Park, "due to the size of the project as it was then proposed" and "the needs of the current tenants of Meakin Park". 1.5.93 IMB signs consultancy agreement with a Cowley company. Cowley's primary task is to secure loan funding for the development, although he is also heavily involved in the establishment and running of the field interviewing division, ie, the marketing arm of IMB. May 1993 IMB representatives meet with Mayor Golledge and Deputy Mayor Ayling; IMB decides to shift its focus from Meakin Park to Logan Park because of the "enormous associated infrastructure cost in terms of decommissioning of the sewerage treatment plant and roadworks" at Meakin Park. 1.6.93 Logan Lions Limited incorporated as a public company. [Michael McLean allotted 135 shares in Logan Lions Limited because of financial contribution to IMB in July 1991.] June 1993 Logan Lions Limited presents a business plan for "the development of a major international sports complex" and for "entry of Logan Lions into the Winfield Cup competition" [Ex C8 tab 31] to the Council. This plan was prepared by Cowley and relates to the establishment of the project at Logan Park. The plan identifies "the funds required" as A$20,000,000 by September 1993 to construct Stage 1, with a further A$20,000,000 for Stage 2 and A$80,000,000 for Stage 3. It identifies three development stages as follows: Stage 1: December 1993 – December 1995, construction of a 15,000 member leagues club with a minimum of 200 poker machines; Stage 2: 1998 – 1999, expansion of the leagues club to provide facilities for up to 60,000 members and housing minimum 600 poker machines; Stage 3: 2003 to 2008, A$80,000,000 development with 40,000 seat main stadium designed to allow upgrade to 60,000 seats; further club facilities upgrade to 100,000 member capacity, minimum 960 poker machines. The plan acknowledges that funding is not in place, but asserts that: "There are in fact several routes, through which the funding of this complex could be achieved successfully. The primary one is to seek a conditional offer of backing from a marketmaker or backer, for a AUD$20 million private placement with a Zero coupon mortgage over the complex, further collateralised through the maturing asset value of the policies in force and a 100 percent claw–back of any equity, after the retiring of the agreed debt." 1.7.93 IMB meets with Logan City Council Finance and Policy Co–ordination Committee. Committee minutes recommend that the Council approve in principle the proposal for development of Logan Park as detailed in the Logan Lions business plan. 9.7.93 The Council advises IMB that it "has approved in principle, [the] proposal for the development of Logan Park as detailed in [the] business plan subject to compliance with all statutory requirements in relation to the leasing of the land, the Contaminated Land Act and the requirements of all relevant Government Departments", and subject also to "further studies being undertaken in relation to traffic, transport and car parking needs associated with the proposed development". July 93 Cowley goes overseas to seek project funding. 28.7.93 Trade Practices Commission ("TPC") corresponds with IMB requesting, inter alia, information as to whether the Council has approved the construction of the Logan Lions club house. IMB also receives inquiries from the Australian Securities Comission (27.7.93), Logan City Council (29.7.93) and Consumer Affairs (30.7.93) about its activities. Early August 1993 David Ivers and McKnoulty, partner in McCullough Robertson, solicitors retained from the outset by IMB, meet with Gustafson and Reghenzanie of the Australian Securities Commission ("ASC"). ASC is concerned that IMB is selling a participation interest in a company without a prospectus. At conclusion of meeting, David Ivers requests ASC to give written notification of the fact that they had investigated and given approval to the marketing activities of IMB. ASC says that it is not their policy to give written clearances. ASC takes no action against IMB. Early August 1993 IMB deals with Logan City Council – The Council had received a complaint regarding one of IMB's field interviewers who had represented that he was from the Council. All field interviewers required by IMB to sign a declaration to the effect that they followed IMB's standard "qualifier" and did not deviate from this. Early August 1993 IMB representatives meet with Gillard and Camileri of Queensland Consumer Affairs. Consumer Affairs takes no action against IMB. 4.8.93 Mateffy Perl Nagy (Queensland) Consulting Engineers Structural & Civil advise the Department of Environment and Heritage of their involvement in the proposed development of Logan Park. 5.8.93 Dynamic Designs writes to the Town Clerk of Logan City Council advising of its retainer by Logan Lions Limited in the proposed development of Logan Park. 6.8.93 David Ivers, with other IMB representatives, meets with Guthrie and Jennings of TPC. TPC identifies conditioning of access to options or shares in Logan Lions Limited on taking out a Legal & General policy as its major concern. 10.8.93 McCullough Robertson writes to TPC advising of steps taken by IMB to meet Commission's third line forcing concerns. IMB seminar presentation changed to extend offer of shares in Logan Lions Limited to anyone who wishes to find their own cash to subscribe $25,000 when shares will become available in ten years' time. IMB sets up a register to reserve a share entitlement to such persons. 11.8.93 Kay Dibben, Sunday Mail journalist, attends an IMB seminar at Springwood. 13.8.93 IMB is notified by McCullough Robertson that the TPC is threatening court action if they do not receive certain undertakings by 17.8.93. McCullough Robertson says Commission has received a report on 11.8.93 that at a recent seminar an IMB presenter said that the only way to get a club membership was to buy a Legal & General policy. 15.8.93 Article by Kay Dibben published in Sunday Mail under headline "Logan Lions In Hot Water – Hard sell tactics attacked". Article refers to TPC investigation. 18.8.93 The Council publishes a notice disassociating itself from any assertions to the effect that the Council has approved, formally endorsed or otherwise affirmed its support for the project other than to advise its preparedness to entertain a formal application for approval of the development proposed by IMB. 16, 17 & 18.8.93 Further correspondence between the TPC and IMB regarding the allegations. 23.8.93 Sunday Mail publishes article under headline "Council In Clash On Club Project", reporting criticisms of IMB. 24.8.93 ASC Officer Gustafson prepares report on his attendance at an IMB seminar the previous evening. Gustafson reports: "The scheme as presented on the night, was in accordance with our understanding, based on previous discussions with the promoters. … It was our opinion that the statements made during the presentation, particularly with respect to risks and obligations were accurate …" 25.8.93 IMB told by project architect, Nelson, that IMB will have to tender for Logan Park as part of the Council's approval process. 27.8.93 Logan Lions formally give Cowley authorisation to seek Stage 1 funding. 29.8.93 Sunday Mail publishes article under headline "Leagues club promoter bankrupt". Article refers again to TPC investigation and to Glenn Ivers being an undischarged bankrupt. 2.9.93 Cowley advises IMB he has been successful in arranging for "a guarantee of loan performance to AUD$ 20 million … from First Assurety Capital Corporation out of Idaho". 9.9.93 Cowley faxes IMB a letter from one Dinitz (said to be involved in arranging the loan guarantee from First Assurety Capital Corporation) which states: "Please be advised that the surety bond for this transaction can be secured and placed. … The surety bond side will require that a letter of intent to be issued by the bank making this loan that said loan is actively being considered … Once we have that in place the formal papers will be forthcoming from the surety side". 15.9.93 IMB stages a national media launch, at which Cowley and one Agathonoff, of the organisation willing to provide funds, announce that IMB has funding of $20,000,000. Glenn Ivers becomes suspicious about Cowley. 16.9.93 IMB receives letter from TPC (dated 15.9.93) notifying that they intend to initiate proceedings against IMB. IMB responds to TPC allegations by detailed fax. 17.9.93 Federal Court proceedings No QG175 of 1993 commenced against IMB and others by the TPC. 17.9.93 Logan City Council's Town Clerk writes to Sommerville, a surveyor and one of the IMB/Logan Lions Limited consultants, proposing the establishment of a "project team" to facilitate the Council's approval process with respect to the project. 17.9.93 Cowley quoted in Albert & Logan News that he was confident that the loan to IMB would go ahead. Michael McLean, Glenn Ivers and John Ivers discuss suspicions about Cowley with David Ivers. 20.9.93 IMB receives letter from Bullen, Group Director of Legal & General, instructing IMB to immediately cease selling Legal & General policies. From 20.9.93 Legal & General withholds commission payments to IMB. IMB lays off its entire staff of over 100 within two days and IMB eventually closes down. Early November 1993 Logan City Council calls for expressions of interest for proposals in relation to the development of Logan Park. 11.11.93 IMB goes into voluntary liquidation. 19.11.93 Logan Lions Limited submits its expression of interest for the development of Logan Park enclosing as the "Financial Viability" part of the submission the Vienna Trust Merchant Bank Limited's conditional offer to finance dated 9.11.93 provided by Cowley. 16.12.93 Logan City Council Finance and Policy Co–ordination Committee recommends that the Logan City Council "agree in principle to the offering of a long term lease to Logan Lions Limited for the purposes of constructing and operating sporting and recreational facilities at Logan Park" and that the agreement in principle be subject to all necessary approvals from relevant government departments; negotiations between the Council and Logan Lions Limited in relation to the structuring and terms of the sub–lease, including the establishment of critical performance criteria in default of which the lease will be deemed cancelled and the requirement to bond the performance in relation to the intermediate criteria; satisfactory negotiation with the Queensland Government in relation to the availability of a lease term necessary to accommodate the sub–lease proposal; Logan Lions Limited satisfying the Council as to the soundness of its financial commitment to the project and negotiations between the Council and Logan Lions Limited on the staging of the proposal. 15.3.94 The Council grants formal approval for the execution of the agreement to lease Logan Park to Logan Lions Limited. 16.3.94 Draft agreement to lease provided to Logan Lions Limited by Council's solicitors, Corrs Chambers Westgarth. 25.3.94 Albert & Logan News report, on 25.3.94, on the Council's decision to enter into a lease with Logan Lions Limited. April 1994 Albert & Logan News report on Logan Lions Limited decision to withdraw from negotiations with the Council due to its inability to obtain funding. The IMB scheme a scam? 22 The Commission's case is that this scheme was one which never had any real prospect of being realised. The Commission's position, put in different ways at different times during the proceedings, was that the scheme was only a vehicle for selling a large number of investment policies and generating large amounts of commission for David and Glenn Ivers (and others associated with them). In closing submissions, the Commission modified its position a little, accepting that the Ivers did have the intention of developing a football club, but only as a means of making money for themselves from commissions from the sale of insurance policies. Consistently with this approach, the Commission during the trial abandoned much of its case as was based on allegations that the respondents had engaged in conduct in contravention of s 52 the TPA by making representations, in connection with the sale of investment policies, about their activities with respect to arranging for the Logan Lions Rugby League team to participate in "The Sydney Rugby League Competition" and "The National Competition". 23 Whether the scheme was essentially a device for generating a large commission income for the Ivers and some of their associates was not investigated by the Commission in any detail. Some of the respondents put their own money into the scheme in the early stages. David Ivers put about $20,000 into it and he said his parents put something of the order of $100,000 into it; the ninth respondent, a close associate of the Ivers, put nearly $150,000 into the scheme. All appear to have lost these investments. I accept this evidence. But some of the respondents have been prepared, when it suited their purposes, to substantially overstate the extent to which they put their own moneys at risk. Coopers & Lybrand were engaged by National Mutual in November 1991 to review IMB's activities and report on them to National Mutual. At a meeting held on 13 November 1991 between Coopers & Lybrand and IMB, attended by Glenn and David Ivers, Mr Sam Backo and Mr Michael McLean, "Backo advised, and other executives at the meeting concurred, that some $750,000 had been invested by the executives present or their family members". 24 The evidence before the Court does not permit a precise view to be formed on how the commission moneys received by IMB from the sale of policies amounting to several millions of dollars were expended. Glenn Ivers said that all the commissions earned from the sale of policies were "put towards trying to get this project to come to fruition". IMB's expenditure on the scheme must have been very large: its full–time staff at one stage exceeded 100 people. At the start of the trial, the respondents produced a document entitled "Expense Comparison … 1993, 1992, 1991" which they said showed a total commission income in this period of $1,459,993, with total expenses exceeding that by nearly one–third. Glenn Ivers acknowledged, however, that the total commission income received by IMB was of the order of $2,000,000. Far and away the biggest expense item was "salaries and wages": it accounted for over 46 percent of the commission income of nearly $1,500,000 shown in the document. The submission by the Commission that most of the commission income received by IMB was expended on that company's operating expenses and not on development of the project appears likely to be correct. Most of the numerous consultants involved from time to time in the project were, according to the Ivers' evidence, engaged on the basis that they would only be paid if the scheme went ahead. The financial information available to the liquidators of IMB, West & Co, at least as at December 1993, was incomplete. But it does indicate that each of the fourth to eighth and the tenth and twelfth respondents were paid from IMB's funds each week fairly modest amounts, by way of salary, in the period 1 July 1992 to 31 October 1993. The ninth respondent received no remuneration. Those records show that the only one of the respondents to receive payments by way of consultancy fees was Cowley, the eleventh respondent; David Ivers says that he or his associated companies were paid a total of $111,412 in the period 5 July 1992 to 14 September 1993. 25 I accept that the commissions were, in substantial part, put back into IMB to fund its activities in selling policies. 26 When, in opening the Commission's case, counsel said that the respondents' real purpose was to use the scheme as a vehicle for selling policies and garnering millions of dollars in commissions, counsel also directed attention to how the selling procedures adopted by IMB changed after Cowley's arrival "to a very hard sell, slick presentation". That the respondents adopted such an approach was put in support of the Commission's case that the real object of the IMB scheme was to generate a substantial commission income for the Ivers and their associates. The Commission's witnesses Ms Dibben, Graham and Mr Matijasevic gave evidence that the respondents did use "hard sell" tactics to pressure people into buying policies. It is convenient to deal now with the question whether the respondents did employ such tactics and with the major attack made by the respondents on the credibility of these three Commission witnesses. A HARD SELL EXERCISE? 27 At the end of July 1993, the Commission, the ASC, Queensland Consumer Affairs and Logan City Council all contacted IMB to raise concerns that each had about different aspects of its activities. At exactly the same time, Dibben, a journalist with the Sunday Mail, was contacted by a woman who complained to her about IMB's activities. Dibben's informant told her that she was going to complain to the Commission also. Dibben procured an invitation from IMB to attend the seminar held on 11 August 1993. She operated her tape recorder intermittently during this seminar presentation and later made what she called "a rough transcript" of the tape recording, now lost. Her first article, which dealt in part with the seminar, was published in the Sunday Mail on 15 August 1993. It included a prominent sub–heading "Hard sell tactics attacked" and a statement attributed by Dibben to an independent financial adviser she had sought out, who said that while the overall concept had merit, he was concerned about reports of "hard sell" methods. It would appear that, though the sub–heading was the work of a Sunday Mail sub–editor, not Dibben herself, the overall impression she had of IMB's activities was one of a "hard sell" exercise. 28 Dibben, in her statement dealing with what took place at the seminar of 11 August 1993, spoke of statements made by Glenn Ivers to the effect that the Legal & General Savings Plan (that she understood the person needed to buy to have the opportunity to purchase shares in Logan Lions at par and to receive foundation life membership) would yield the $25,000 necessary ten years hence to buy the 25,000 $1 shares at par. She also said she was told by a female representative of IMB – almost certainly Ms Monique Tenboer – at the end of the seminar that Logan Lions already had a 99 year lease on Logan Park and, by another IMB representative, Dallas Reeves, that IMB had "a stamp duty lease" on Logan Park and that, so far as Council approval for the development was concerned, IMB had 50 percent approval. Dibben also said she telephoned IMB the following day and spoke to a woman named Monique, who answered her question about what the shares mentioned at the seminar the previous evening would be worth by saying that, when Logan Lions was up and running in about ten years, a conservative estimate of the value of the shares would be $4 to $5. 29 I have reservations about the reliability of much of Dibben's evidence. I think it likely she went to the seminar she attended already of the view that IMB's activities probably involved sharp practice and had that view confirmed by what she considered was the "hard sell" approach of the IMB representatives. I think her unjustified perception that IMB was engaging in this sort of sales tactic coloured her account of her dealings with IMB people. I do not suggest she did anything other than record her recollections of her dealings with IMB when she gave the Commission her statement dated 6 September 1993. But Monique Tenboer – the woman she spoke to after the seminar of 11 August 1993 and the "Monique" to whom she spoke on 12 August 1993 – gave credible evidence contradicting Dibben's statement that she had given an unqualified opinion that the shares would be worth $4 to $5 in ten years' time. Tenboer also denied Dibben's evidence that she told Dibben that IMB had actually got the lease of the land and she confirmed the accuracy of Dallas Reeves' statement concerning his dealings with Dibben on the night of 11 August: Reeves died before the trial. He contradicted what Dibben had to say about him telling her that IMB had a "stamp duty lease". Mr and Mrs Worrall, who attended the seminar on the evening of 11 August 1993, do perhaps tend to confirm Dibben's evidence that she was given the impression by Glenn Ivers during the seminar that the only way to get the opportunity to buy shares in Logan Lions and life membership was to buy a policy, in so far as they say Backo told them as much in a conversation they had with him at the premises after the seminar. But otherwise, they contradict Dibben's account of what was said during the seminar. They contradict her evidence that things were said in the course of the seminar that created the impression that Logan Lions was assured of entry in the New South Wales Rugby League competition: they said they were told only that IMB was, in effect, very optimistic that the bid would be accepted, though there was no guarantee of that. Though Dibben does not mention being told during the seminar of the status of the Council lease on Logan Park and refers to that only in the context of speaking with a female representative at the end of the seminar – Monique Tenboer – Mr and Mrs Worrall said that the seminar meeting was told that IMB had been involved in an extensive approval process with the Council, which was prepared to consider its application, but IMB had to conform to all requirements and there were no "absolute guarantees that final approval would be given". They say that Glenn Ivers did invite members of the audience to nominate likely share values in ten years' time and wrote on a whiteboard one of the extreme suggestions of $12 and then some more "cautious or realistic figures". But they both say they were told that there could be no guarantees as to what the future value of the shares in Logan Lions might be and that they were also told that if IMB failed to get the project off the ground, then the policy purchaser would still have an investment policy in his own name. What Dibben described as "the rough transcript" she made of the tape recording of the seminar appears to cover all of the events of the evening of 11 August 1993. The document is not, however, in the sequence that could be expected of such a tape recording. Nor does it mention some matters that appear in Dibben's statement of 6 September 1993, such as Glenn Ivers' opening suggestion about earning $100,000 in ten years' time. 30 Graham was closely involved in the selling of Legal & General policies to people prepared to participate in the IMB scheme throughout 1992. He, with a number of the other respondents, was a director of Redbeak Pty Ltd, once a respondent but now in liquidation, a company interposed between Legal & General and IMB. He was called by the Commission and gave evidence damaging to the respondents in a number of respects. He too spoke of the "hard sell" approach adopted particularly by Cowley. 31 However, I am not prepared to accept his evidence as reliable. Contrary to his evidence, he was forced to sever his involvement with the IMB scheme and resign his position as a director of Redbeak Pty Ltd on 17 November 1992 by others of the respondents who were the other directors of that company. It was established, though Graham denied knowing anything about it, that at his direction, Legal & General, instead of paying a sum of over $13,000 to IMB in respect of commissions on policies sold in September 1992, credited that sum in reduction of Graham's personal loan account with Legal & General. There is reason to think that this sum was but part of the total amount of commissions that Graham diverted from IMB to his own use. His evidence, that in late 1992 an IMB representative stood up and said at a sales seminar that they had raised $20,000,000, is unacceptable: he appears pretty obviously to be referring to what he learned took place at the Logan Lions media launch on 15 September 1993, long after he had severed all connection with IMB. In oral evidence, he significantly qualified his evidence that at seminars Glenn and David Ivers and Cowley each made statements that the Australian Rugby League had approved the application for a team from Logan to join the Sydney competition. The respondents developed in their submissions a detailed attack on Graham's credibility. The Commission did not attempt to answer this attack save in respect of a couple of peripheral matters. 32 The Commission also called Matijasevic, who had worked for IMB from the end of June 1993 to the end of the following August. Matijasevic said he quit his job because of differences he had with his boss, Mr Bill Musgrave, the tenth respondent. He said Musgrave and a Ms Wilkinson, who between them conducted the instructional sessions for sales staff which he attended each morning, both urged sales people to adopt a very "hard sell" approach. He gives details of the instructions he got, particularly from Musgrave, about how to pressure clients into committing themselves before leaving a seminar. He also commented in his first statement to the Commission of October 1993 that Mr Stone, the eighth respondent, expressed concerns about Musgrave's approach as being too "hard sell". Musgrave did not give evidence. Though Matijasevic said in his statement of October 1993 that he was good at selling policies in the "hard sell" way that Musgrave instructed him to follow, in cross–examination he denied ever using "hard sell" tactics himself. 33 The respondents attacked Matijasevic's credit on the ground that he was biased against them because the respondents sacked him. Matijasevic said it was he who made the decision to leave IMB. He had considerable difficulty in getting on with his immediate superior, Musgrave. He acknowledged that he did not like Musgrave. I do not, however, accept that Matijasevic's evidence should be disregarded because of bias against any of the respondents. He appears to have quickly become a valued employee of IMB. Belatedly located IMB employee records show that he was not dismissed, but had resigned. David Ivers, who claimed he dismissed Matijasevic after complaints from Musgrave and Wilkinson, proffered a range of other, unconvincing reasons for dismissing Matijasevic. I prefer the contemporaneous records of IMB to David Ivers' evidence here. 34 I do not accept what Dibben, Graham and Matijasevic say about IMB using "hard sell" tactics. There is an abundance of evidence from people who bought policies about the complete absence of any "hard sell" approach and of the immediate willingness of all the IMB people they dealt with to respect their wishes to go home and think about things before deciding whether to commit themselves to buying a policy. All the IMB witnesses, including Gustafson from the ASC who attended an IMB sales seminar on 23 August 1993 without revealing his identity as an ASC officer, expressed the view that no "hard sell" tactics were used. Some gave convincing explanations of the opportunities they were given to think about whether they would buy a policy, which further shows that whatever else the IMB operation may have been, it was not one which employed "hard sell" tactics to sign up people to the insurance policies. See, eg, Messrs Stokes, Taylor and Brooks and Mr and Mrs Worrall (who decided not to purchase a policy). Though those of the respondents and some of the people employed by IMB who were involved in dealing with potential purchasers of policies, described the scheme in a highly optimistic light to encourage people to buy policies, there was no attempt to pressure people into doing that. The respondents enlist the support of over 1,300 witnesses 35 There is another barrier to accepting that the Ivers were only in the scheme for the commission moneys they could make from it. Though IMB's activities came to a stop in about September 1993, the Ivers have been able to maintain extraordinary support from a very large number of people who, on the Commission's view of things, are the respondents' victims. 36 To prove its case based on representations contravening the TPA, the Commission, in addition to the statements contained in documentary material generated by the respondents and used in IMB's promotional activities, ultimately called evidence from eighteen witnesses: thirteen had attended various IMB seminars or took part in a face–to–face interview with an IMB representative, one, Matijasevic, was a former employee of IMB and another, Graham, a former business associate of the respondents. Two experts and an officer of Logan City Council, made up the rest of the list. 37 The Commission had initially intended to call a total of about seventy witnesses, many of whom had participated in IMB sales presentations. The respondents asserted and put on evidence to show that it might be arguable that the Commission had engaged in conduct, in procuring statements from a large number of these people, sufficient to justify the exclusion of their evidence on discretionary grounds under s 138 the Evidence Act 1995 (Cth). The Commission did not rely at trial on any of these witnesses. Ultimately, it confined its case, so far as people who had participated in IMB marketing activities, to the fifteen witnesses mentioned. No attack was made by the respondents on the evidence of any of these fifteen witnesses in reliance on s 138 the Evidence Act. The Commission contended that it had, in fact, decided to limit its case to twenty of its seventy witnesses in December 1997 and had told the respondents this before the respondents raised this challenge. (See its letter to IMB, Ex C101.) There this matter rested and I therefore draw no adverse inference against the Commission because it so confined its case. 38 In order to answer the Commission's case by showing that some of the oral representations alleged by the Commission were not made by IMB or those working for it, and to establish that people who attended the seminars, including the many who bought investment policies, were given a clear picture of the risks involved in participation in the IMB scheme, the Ivers and those working with them, often it seems without legal assistance, were able to enlist the continuing support of many hundreds of people, procure from them signed statements for use in these proceedings and also procure expressions of willingness to attend to give evidence at Court. The respondents filed statements from a total of 1,340 people they intended to call as witnesses. These statements were broken down by the Commission, in a fashion with which the respondents agreed, into Categories A to J. Category A comprises statements by five of the respondents, but there is attached to Glenn Ivers' statement, statements from eleven other persons holding positions in third party organisations such as the Australian Rugby League, Logan City Council, National Mutual, Legal & General, etc, most of whom also gave evidence. Category B comprises statements obtained from seventeen former employees of IMB, while Category C comprises statements obtained from seventeen people who attended IMB promotional seminars, some of whom purchased policies, and who had also provided statements to the Commission. Categories D to J comprise statements either in the form of the witness' own answers to various forms of questionnaire prepared by IMB or statements prepared by IMB on the basis of questionnaires answered by the witnesses. There are 1,302 such statements. Many of the witnesses who gave statements in Categories D to J did not take part in a one–to–one interview with anyone acting for IMB, but rather attended meetings convened by IMB to solicit their assistance as witnesses and filled out the questionnaires they were then given either before leaving the seminar or later, at home. The Category J witnesses and the sample of forty of those witnesses 39 The Category J witnesses, 439 in all, are particularly important. They all attended IMB's promotional seminars and bought policies as a result. Their statements were generated from their answers to a questionnaire drafted by an experienced barrister then retained by the respondents. This questionnaire was answered by each Category J witness some years after the sales seminar they had attended. It directed the person's attention to the factual issues central to the Commission's case in so far as that was based on the oral and written promotional information disseminated by IMB. Though broadly in standard form, a large number of the statements contain significant variations reflecting the views on matters of relevance to the litigation of the individual who provided the particular statement. The 155 Category H and the 633 Category I witness statements were procured by the use by the respondents of forms of questionnaire that were accepted by the respondents as not likely to elicit information from those witnesses that focused with precision on the issues in the litigation. 40 The respondents began by wanting to call all 439 of the Category J witnesses. I was not prepared to allow that. The respondents accepted that. There was much discussion about how justice could be done to the respondents' answer to the Commission's case based on the making of representations in contravention of the TPA, given that the respondents' answering case acquired so much of its force from the large number of witnesses prepared to contradict the Commission's case. Ultimately, the parties agreed to the District Registrar randomly selecting forty of the Category J witnesses from the entire 439 and to my relying on my assessment of their evidence as an indication of the likely effect of the evidence of all 439. 41 The Commission has made some trenchant criticisms of the exercise that produced the 439 Category J witness statements and of the reliability of the Category J witnesses in the sample of forty who were called to give evidence. The Commission points out, on the one hand, that the form of the questionnaires and the circumstances in which the Category J witnesses were asked to complete them – presentations by the Ivers highly critical of the Commission's actions – was such as to be likely to produce the answers the respondents wanted. But other submissions by the Commission recognise that this did not in fact occur: the Commission points to the significant disparities in the recollections of the Category J witnesses about what was said at the seminars at which the respondents' representatives gave scripted or standard form presentations. As will appear, the Category J witnesses who gave evidence were not blind supporters of IMB: their evidence covers a range of views on the issues in the case. Some advance IMB's case on some, but not all issues on which they were proofed. Some give evidence that does not assist IMB on other issues. 42 Not all the Category J witnesses attended meetings convened by the Ivers years after IMB's collapse in an endeavour to enlist the support of people as witnesses in this litigation; a small number received questionnaires which they later filled out in other circumstances, eg, Mrs Lowe received her questionnaire through the post at her Mackay home and Mr Elliott was telephoned by David Ivers, who asked him to fill out the questionnaire which Elliott picked up from Ivers later on. But most of the Category J witnesses in the sample who gave evidence got their questionnaires at these meetings. 43 However, it is, in my opinion, clear that though the Ivers at these meetings criticised in strong terms the actions of the Commission in moving against IMB in September 1993, they put no pressure on anyone to fill out the questionnaires and no pressure on anyone to give particular answers to the questions asked in the document. At least ten of the Category J witnesses said they completed the questionnaires at the meeting. But at least eight of the Category J witnesses who gave oral evidence took the questionnaires they were given at the meetings home, completed them there at their leisure and returned them later on to the Ivers. Elliott and Lowe also completed their questionnaires at home. None of the Category J sample witnesses agreed with suggestions in cross–examination that any of the respondents sought to influence the answers they provided to the questionnaire. Some gave evidence that the Ivers took care not to do that. Mrs Lane said that, when she asked David Ivers to assist in answering one of the questions, he refused, telling her she had to answer the questionnaire herself and Miss Duncan recalled that the meeting she attended was told by the IMB representative that it was up to the people there to decide for themselves whether they wished to answer the questionnaire and that, if they did so, they should base their answers on their own recollections of what took place at the earlier sales seminars the subject of the litigation. 44 The Commission also points out that shortly before each of the Category J witnesses gave evidence, they were given another questionnaire by the Ivers. This document asks a series of questions directed to significant issues in the litigation and thus matters about which the witness could expect to be cross–examined. Various of the witnesses filled out these pre–evidence questionnaires. The Commission criticises this process as having influenced the content of the oral evidence given shortly thereafter by the particular witness. It is not surprising that some of the witnesses repeated in their oral evidence the substance of what appears in their pre–trial questionnaire: the witnesses were there dealing with issues central to the litigation about which they were cross–examined soon after. It appears from the form of this document, of which Ex C96 is an example, that the witness filling out this particular pre–trial questionnaire answered in his or her own words, often volunteering relevant information beyond what would have been a sufficient answer to the particular question. The use of this pre–trial questionnaire by the Ivers does not appear to be too dissimilar from the practice of counsel having a pre–trial conference with witnesses. 45 The Commission, in its closing submissions, argued that the 439 statements from which the sample of forty was taken comprised only those people the respondents wished to call to give evidence and did not include those contacted who refused to give evidence or complete questionnaires. Whether there was any significant number of people who had purchased policies or had attended seminars without purchasing policies, but who had been contacted by the respondents and refused to give evidence or complete questionnaires was not the subject of any investigation by the Commission. But even if there were only 439 from the thousands who attended the IMB sales seminars in 1991 to 1993 prepared to give evidence for the respondents, that would still show a very high level of support for them. The Commission's submission that the random selection was made from persons sympathetic to the respondents should be rejected: persons were included in Category J because they had provided statements in response to a professionally settled questionnaire. Witnesses in Categories H and I were not relied on by the respondents because the questionnaires used to generate their statements were not drawn with the precision of those given to the Category J witnesses. Yet there were 788 witnesses in Categories H and I. To be able to obtain the co–operation of 1,227 people in providing statements for possible use in litigation is, in my opinion, a remarkable indication of widespread support for the respondents' defence to the Commission's case within the community in which the respondents continue to live. 46 Some, but by no means all, of the Category J witnesses could be thought to have a motive, in the form of a financial expectation in the event of the Commission's case failing against the respondents and the respondents ultimately succeeding in making out a claim for damages against the Commission. The respondents already have representative proceedings against the Commission on foot in the Supreme Court on behalf of persons who were members of the Logan Lions Syndicate in the period January 1991 to September 1993. David Ivers said a couple of hundred persons had given their consent to this action being brought. He could not say how many of the Category J witnesses had given their consent. It is likely some did. By no means all did, as the oral evidence of the respondents' witnesses shows. Of the thirty–three of the forty Category J sample witnesses who gave evidence, only one, Elliott, said he had heard of a possible class action by IMB against Legal & General or the Commission in relation to the Logan Lions project; he said, however, he had not agreed to be part of it, at least as at the time he gave evidence. The respondents also called a number of Category J witnesses, thirty–five in all, none of whom were included in the sample of forty selected by the District Registrar. Nine of these thirty–five were aware that IMB had brought proceedings in respect of the closure of the Logan Lions project: five of these nine (Messrs Martin, Taylor, Roche, Soper and Mrs Bolt) had indicated their willingness to participate in that action. The massive support that the respondents were able to obtain and maintain in connection with this litigation from people who, on the Commission's case, are their victims requires caution on the part of the Court before accepting that the witnesses were motivated by the hope of personal financial advantage and the respondents' activities can be explained as motivated merely by personal gain. 47 Ultimately, only thirty–three of the sample of forty selected from this pool of potential Category J witnesses were actually called by the respondents. Seven of the forty Category J witnesses selected in the sample could not be located or for other reasons could not be called by the respondents, though the written statement of Ms Naysmith was marked as an exhibit, without objection: she was willing to give evidence, but could not afford to travel to Brisbane. Mrs Wainwright was wrongly said by the Commission, in its closing submissions, not to have been called: she gave oral evidence on which she was cross–examined. A number of the thirty–three who gave oral evidence turned out to have no useful or only a very poor recollection of relevant events. They were Messrs Black, Cook, Shepherd and Ketter, Mrs V Nothling, Ms Whitworth, Mrs Watson and Mrs Brown. (The respondents expressly abandoned reliance on the last two.) Three, Messrs Foss, Gaston and Demaine, were wrongly included in Category J: they did not attend promotional seminars, but purchased policies as a result of face–to–face interviews. The remaining twenty–two provided evidence that was useful in showing what took place at a large number of IMB seminars and the impressions each came away with about the effect of what was said about the topics about which the Commission claims IMB made representations contravening the TPA. Though the extent to which each of these twenty–two witnesses supported the respondents' case varied, it is of importance that none gave evidence that provided any significant support for the Commission's case save on the issue concerned with representations as to the future value of the shares offered by IMB. Though only thirty–three of the sample of forty selected from the 439 Category J witnesses gave evidence and only twenty–two gave evidence of value, that does not detract from the fact that the respondents were in a position to call many hundreds of people long after the scheme collapsed to support their defence to the Commission's claims. 48 The respondents called seventy–one witnesses in all. A large number of these, including thirty of the Category J sample witnesses who gave evidence at trial, had attended IMB promotional seminars and a further group had taken part in interviews with an IMB representative at their homes. All save two bought policies. These two, Mr and Mrs Worrall, attended the seminar of 11 August 1993 also attended by the journalist Dibben, who then wrote articles critical of IMB. They gave evidence contradicting Dibben's account of what was said at that seminar. Some of the witnesses called who attended seminars were Category J witnesses who had not, however, been selected by the sample exercise. Nor were they present at seminars attended by any of the Commission's witnesses. They were called, pretty obviously, because the respondents thought their evidence would bolster their case. The respondents called most without objection by the Commission, until well into the trial, to this departure from the process for calling only a sample of Category J witnesses. Ultimately, the Commission agreed to the respondents calling the limited number of such other Category J witnesses that they did. EXCLUSIVE DEALING 49 The Commission alleges that the respondents' conduct, set out in par 19 of the latest version of its statement of claim filed 6 October 1999, constitutes conduct contravening s 47(6) the TPA, while the respondents' conduct set out in par 20 of the pleading contravenes s 47(7) the TPA. The allegations are: "18. To induce members of the public to purchase 'Lifestyle Protection Plans' and 'Umbrella Financial Plans' the IMB National Mutual Agents (with respect to the period February 1991 to January 1992) and the IMB Legal & General Agents (with respect to the period January 1992 to September 1993) at the seminars and during the interviews, engaged in the conduct referred to in paragraphs 19 to 29 hereof. Exclusive Dealing 19. Offered to supply to persons attending the seminars services, namely the benefit or privilege of: (a) an opportunity or option to acquire shares in a company (which became the third respondent) or alternatively, to acquire such shares upon terms more favourable than might be available to members of the public; (b) an opportunity to become a foundation life member of 'the 2001 Rugby League Syndicate' or alternatively of a club with the benefits and privileges attaching to such membership, on the condition that those persons acquired services, namely: (c) in the period from in or about March 1991 to December 1991, from The National Mutual Life Association of Australasia, rights and benefits under a 'National Mutual Lifestyle Protection Plan' policy; (d) in the period from in or about January 1992 to and including September 1993, from Legal & General Life of Australia Limited, the rights and benefits under a Legal & General 'Umbrella Financial Plan'; PARTICULARS The applicant relies upon the following facts and matters: (i) In the period March 1991 to in or about December 1991: Ex C 3 (Video) Ex C 8 tabs 3; 4; 5; 15 (brochures) Ex C 18 (Hansen) Ex C 19 (Matlick) Ex C 24 (Jones) Ex C 36 (Christie) (ii) In the period January 1992 to in or about November 1992: Ex C 8 tabs 15; 17A and 21 Ex C 14 and 16 (Graham) Ex C 29 (Eden) (iii) In 1993: Ex C 4 Ex C 21 Ex C 9 (Dibben) – 11 August 1993 Ex C 8 tabs 15 and 21 Ex C 37 (Colbran) – 23 June 1993 Ex C 32 (Matijasevic) – June to August 1993 Ex C 39 (Webster) Ex C 40 (Stokes) 20. Alternative, refused to supply to person services, namely the benefit or privilege of: (a) an opportunity or option to acquire shares in a company (subsequently to become the third respondent) or alternatively to acquire such shares upon terms more favourable than might be available to members of the public; (b) an opportunity to become a foundation life member of 'the2001 Rugby League Syndicate' or alternatively of a club with the benefits and privileges attaching to such membership, for the reason that such persons had not agreed to, or did not continue to acquire services, namely: (c) in the period from in or about March 1991 to December 1991, from The National Mutual Life Association of Australasia, the rights and benefits under a 'National Mutual Lifestyle Protection Plan' policy; (d) in the period from in or about January 1992 to and including September 1993, from Legal & General Life of Australia Limited the rights and benefits under a Legal & General 'Umbrella Financial Plan'. PARTICULARS The applicant relies upon the following facts and matters: (i) In the period March 1991 to in or about December 1991: Ex C 8 tabs 3; 4; 15 (brochures) Ex C 18 para 12 (Hansen) Ex C 36 (Christie) (ii) In the period January 1992 to in or about September 1993: Ex C 9 (Dibben) – August 1993 Ex C 8 tab 21 'Dear Founding Member' letters Ex C 8 tab 28 'Lions Roar' Ex C 39 (Webster) … 31. Further, the conduct referred to in paragraphs 19 and 20; (a) constituted exclusive dealing in contravention of section 47 of the Act; (b) was misleading and deceptive or likely to mislead or deceive in contravention of s.52(1) of the Act; (c) constituted the making of false or misleading representations as to the need for services, namely, the rights and benefits under The National Mutual Life Association of Australasia's 'Lifestyle Protection Plan' and the rights and benefits under Legal & General's 'Umbrella Financial Plan' in the terms promoted by the IMB Group, in contravention of s.53(f) of the Act." 50 The references to persons by name in the particulars in these paragraphs of the Commission's pleading are to the statements of those persons put in evidence by the Commission. Section 47 THE Trade Practices Act – the statutory provisions 51 Exclusive dealing is dealt with by s 47 in Pt IV the TPA, headed "Restrictive trade practices". Section 47(1) provides: "Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing." It is the practice of third line forcing (or third party tying), a form of exclusive dealing, that is prohibited by s 47(6) and (7). Section 47(6) provides: "A corporation also engages in the practice of exclusive dealing if the corporation: (a) supplies, or offers to supply, goods or services; (b) supplies, or offers to supply, goods or services at a particular price; or (c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation; on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person." 52 Section 47(7) provides: "A corporation also engages in the practice of exclusive dealing if the corporation refuses: (a) to supply goods or services to a person; (b) to supply goods or services at a particular price to a person; or (c) to give or allow a discount, allowance, rebate or credit in relation to the supply of goods or services to a person; for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person." 53 Section 47(10) provides: "Subsection (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in subsection (2), (3), (4) or (5) or paragraph (8) (a) or (b) or (9) (a), (b) or (c) unless: (a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or (b) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening competition." 54 "Services" is defined in s 4(1) as including: "any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under – (a) a contract for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the supply of goods; (ii) the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar extraction; (b) a contract of insurance; (c) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (d) any contract for or in relation to the lending of moneys; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service." 55 "Supply", when used as a verb, is defined in s 4(1) as including: "(a) in relation to goods – supply (including re–supply) by way of sale, exchange, lease, hire or hire–purchase; and (b) in relation to services – provide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings." 56 There is no requirement that conduct must be done for the purpose or effect or likely effect of substantially lessening competition before there will be a contravention of s 47(6) or (7). In this respect these provisions differ from most of the other prohibitions in Pt IV, including other prohibitions in s 47, to which the "substantial lessening of competition" test applies. Third line forcing has been the subject of a per se prohibition since the enactment of s 47. Per se prohibitions under the TPA, like those in s 47(6) and (7), can be justified if they are reserved for conduct that is so likely to damage competition that it is prohibited absolutely. It was justified on this basis by the Swanson Committee in its review of the TPA in 1976: "In the opinion of the Committee the practice of forcing another person's product may be justifiable in certain cases. However, the Committee is of the opinion that the practice will, in virtually all cases, have an anticompetitive effect and that it should, accordingly, continue to be capable of justification upon the ground only of public benefit." (Trade Practices Act Review Committee (Chair: TB Swanson), Report to the Minister of Business and Consumer Affairs (1976) at 30) 57 Sub–sections 47(6) and (7) have been criticised on the ground that third line forcing is not conduct which is so inherently anti–competitive as to justify per se prohibition and that the "effects on competition" test under s 47(10) should apply. See A Hurley, The Castlemaine Tooheys Case and the Interpretation of the "Third Line Forcing" Provisions (1987) 61 ALJ 415, RI McEwin, Third Line Forcing in Australia (1994) 22 ABLR 114 and J Lipton, Third Line Forcing in Australia: Current Problems and Future Directions (1996) 4 TPLJ 77. Lipton comments (at 78) that "many instances of third line forcing lead to no damage to competition in a market and that such conduct may occasionally lead to benefits in a market". 58 The Hilmer Report (Report by the Independent Committee of Inquiry (Chair: FG Hilmer), National Competition Policy Review (1993) AGPS, Canberra) recommended that the per se prohibition on third line forcing should be removed and that it should instead be subject to the "substantial lessening of competition" test, thereby bringing it "into line with the Act's treatment of other forms of exclusive dealing" under s 47. (See pp xxiii and 52 – 53.) This recommendation was not followed, although, by the Competition Policy Reform Act 1995 (Cth), a procedure was introduced by the new Div 2 of Pt VII the TPA whereby a corporation can notify the Commission that it was engaged or proposed to engage in conduct of the kind referred to in s 47(6) and (7); the Commission can then, if satisfied that the conduct was or would not be likely to be detrimental to competition, issue a notification to that effect. Such a notification by force of s 47(10A) gives statutory protection to the corporation which might otherwise be exposed to action because of its breach of s 47(6) and (7). These provisions are not relevant to the present case, coming into effect only on 17 August 1995. But they do indicate that Parliament's concern in s 47(6) and (7) is with anti–competitive conduct and appear to be a reassertion of the view that many, if not most instances of third line tying will be anti–competitive. 59 As appears from pars 18 and 31(b) and (c) of the pleading, the Commission alleges that the conduct in pars 19 and 20 said to involve exclusive dealing was engaged in in order to induce members of the public to purchase insurance policies and that that conduct contravened not only s 47, but also ss 52 and 53(f) the TPA. Consideration of the last two allegations can be put to one side for the moment. EXCLUSIVE DEALING – THE EVIDENCE 60 A number of witnesses called by the Commission who attended IMB seminars said that they were told, in effect, that shares and life membership in the club were linked to purchasing a policy. The witness Stokes said that he was told that as late as 16 September 1993 by a Logan Lions district manager, Wilkinson, immediately after the seminar he attended. Some IMB witnesses said the same, eg, Mr Thomas, who attended a seminar late in the piece also, in August 1993. Many IMB witnesses, however, said that they were not told that shares or life membership was dependent upon buying a policy. See, eg, Mr Nicholson, Roche, Demaine, Mr Mundy and Martin. Some, eg, Mr Churchward, recognised that life membership was a question for the club when it was formed in the future. 61 It is unnecessary, however, to analyse in detail the evidence of the Commission's witnesses and those of IMB, both those who attended IMB seminars and those who worked for IMB, in order to determine whether IMB did engage in conduct capable of amounting to infringements of s 47(6) and (7) the TPA. It is plain from documents produced by IMB, including the transcripts of videos shown and brochures distributed by IMB at seminars and to potential investors when interviewed by IMB sales representatives, throughout the period of concern to the Commission, ie, from early 1991 to late 1993, that IMB and its representatives did, by distributing that material, make numerous statements that shares in the project at par value of $1 and life membership in the proposed rugby league club would both only be available to persons who held policies at the time of the float of the company that would run the completed project. Some examples of such statements follow: (a) The "2001 Rugby League Syndicate" document [Ex C8 tab 3] was, according to Glenn Ivers, produced about mid 1991 to give to National Mutual, though he acknowledged it may have been given to some early policyholders. It contains the following statements: "OWNERSHIP The entire $125 million Development will be owned outright by 5,000 shareholders, each holding 25,000 $1.00 ordinary shares. FUNDING Each of the 5,000 Shareholders contribute $25.00 per week into an investment policy in their own name with National Mutual … Loans Backs against the accumulation in this policy fund each individual share purchaser over three stages. [The three stages are then set out in tabular form.] … Points … 7. At all times the cash value of your investment policy exceeds the total loan amount giving you the option of paying out all loans and owing your share outright." (emphasis added) (b) The National Mutual video [Ex C8 tab 1A] which was shown at seminars in late 1991 spelled out key features of the proposal as it was envisaged at that stage. Statements made include: "The 2001 Rugby League Syndicate is structured to give 5,000 unit holders outright ownership of $125M debt free business over a 10 year period. There will only ever be 5,000 units issued making the 2001 Rugby League Syndicate strictly a limited offer. … Ownership of one unit buys you 25,000 $1.00 shares over this 10 years. A $25,000 unit will cost you $25.00 a week today. … The vehicle for accumulating capital is a National Mutual Pure Investment Account in the name of the unit holder. A loan back facility attached to this policy allows you access to $2,000 in 1994, $5,000 in 1997 and a further $18,000 in the year 2001 which guarantees you the money to purchase shares in the three stages of development. At all times the cash value of your account is higher than the loan amount, giving you outright ownership of your shareholding in the 2001 Rugby League Syndicate." (emphasis added) The implication in this material is that ownership of a policy is essential to becoming a shareholder in the development. That implication is stated in express terms in other IMB documents, together with the need to purchase a policy to get life membership in the club. (c) The "Members Information Portfolio" [C8 tab 15] was distributed to many attendees at seminars through the first half of 1992 (though a few may have been distributed thereafter until March 1993). This contains the following statements: "THE INVESTMENT CONCEPT Shareholders of the Company will provide 125 million dollars towards the developments. The objective of the funding method is to bring the investment into an affordable price range … [p 3] AFFORDABILITY Affordability is the key. The minimum initial investment of $12.50 per week gives you 12,500 one dollar shares in the development … [p 3] YOUR INVESTMENT POLICY Your investment contributions go straight into an investment policy in your own name with either National Mutual Life or Legal and General Life. The accumulation of contributions, together with interest earned, is the means to finance the purchase of shares in the Company at each stage of the development. Loans against the security of the cash value of the Policy, provides access to capital to meet share purchases … [p 4] SHARE ALLOCATION It is intended that a public company be formed to undertake the developments. Only Policyholders will be given the opportunity to subscribe for shares in the Company. … The timetable for subscription for shares is such that members will only be required to subscribe for shares in the Company if the cash value of the Policy exceeds the amount to be subscribed for that parcel of shares … POTENTIAL BENEFITS TO SHAREHOLDERS … Free Family Life Membership of the club – The first 1,250 Policy Holders only, receive a lifetime membership entitlement to the use of all club facilities – which includes their immediate family. [p 5]" (emphasis added) (d) The "Dear Founding Member" letters [C8 tab 21] were first distributed in about July 1992, when IMB abandoned its initial idea of funding the development with loan moneys that would become available to policyholders from the insurer who issued the policies and, on Cowley's advice, decided to seek external development funding in reliance on the availability of the policies as security for such funding. The text of these letters changes over time, but they cover the period from mid 1992 to August 1993. These letters contain statements conveying to readers that shares in the project and founding life membership in the syndicate would be confined to persons holding policies who would be called on to assign those policies to the project's financier. For example, the "Dear Founding Member" letter addressed to M and C Steeden around July 1992 states: "SOME IMPORTANT NOTES ON YOUR BENEFITS: * A Public Company is intended in due course, to take over as the final operating vehicle for the I.M.B. 2001 Rugby League Syndicate – Meakin Park complex. To this end, I.M.B. have reserved in your name, (25,000) $1 share options. * It should be noted, the exercise of your rights to convert these 25,000 options into shares as called upon, is compliant on and based upon the assumption, of your Legal and General investment policy remaining in force, fully paid up until maturity in 10 years time. * Whilst there is absolutely no obligation on your part to do so, your right to these shares is dependent upon your assigning the proceeds of the investment policy to the company as and when called upon to do so." (emphasis added) The "Dear Founding Member" letter issued to G Colbran in July 1993 contains the following: "SOME IMPORTANT NOTES TO ALL FOUNDING MEMBERS: * The public company, Logan Lions Limited, was formed as the project company and it is intended, subject to production and approval of a prospectus, from the Australian Securities Commission, to then seek permission from the Stock exchange for listing of this company's shares. In the interim, your place is preserved without obligation, in our roll of syndicate members to secure up to AUD $12,500 dollars worth of shares at par, if and when this approval is forthcoming. * The vehicle for you to save up this money of course, is the investment savings policy held by you in your name. … * Please note, there is ABSOLUTELY NO LEGAL OBLIGATION on your or any participant's part, to assign proceeds of their policies. Clearly though, allocation of any future shares, if and when a prospectus is approved, is wholly dependent upon a participants ultimate decision to do so, at the time called upon and in such manner as requested, by the eventual underwriter–backer to the development. * The inherent safety for people deciding to participate can be found in the fact, that because these policies are held in the families' own names, if something unforseen prevented the development proceeding, the worst position we can find ourselves in, is we have saved up some money, which in itself, I believe has to be a good thing. * N.B. Whilst there is no obligation to continue savings policy contributions, exercise of any share rights in the future, along with the founding life membership entitlement, is compliant on and based upon the clear assumption, of the Investment policy remaining in force until fully paid, in order to acquire the necessary funds. * When the club officially opens, you and your family will be invited as V.I.P. GUESTS to receive your permanent special privileges Gold card. Meanwhile, an interim Foundation Life Membership Certificate, will be presented shortly …" (emphasis added) The latter form of letter, with minor variations, seems to have been that used throughout the period from about mid 1993 to September 1993. (e) The "Logan Lions Rugby League Club – A very rewarding investment in our community's future" document [Ex C8 tab 34] was issued in mid 1992 and used at seminars. David Ivers said it replaced the "Members Information Portfolio" document in item (c) above. It contains the following statements: "How your investment works. This is your opportunity to own a part of Logan. To become a founding Life club member and a shareholder in a multi–million dollar, debt free Sporting, Entertainment and Tourism company. … It is intended a public company will undertake the developments and I.M.B. Group policy–holders will be given the opportunity to subscribe to shares in the company … The possible benefits to shareholders are: … · Free family life membership to I.M.B. Group policy holders" (emphasis added) (f) The document titled "The Business Plan" was produced by IMB in late June or early July 1993 and submitted to Logan City Council. [Ex C8 tab 31] The language is Cowley's. It states: "Ahead of the Company formation, interested locals were invited to invest in their name, into an Insurance underwritten, capital guaranteed cash fund, agreeing at time of joining but without obligation, to assign the proceeds of their policy in exchange for a future share position, as and when required by the eventual backer. The maturing worth of these policies with (plus or minus) 10 year fallout predicted at around $25,000 would provide the capital short and long term to develop the plan. (At April 1993 there were 1,500 policy investment holders with a lapse rate factored fallout representing just over, $30m by 2003). A minimum of 3,000 is envisaged, by JULY 1994, giving just in excess of a further $30m in 2004. … [S]ince the middle of 1991 [the company] has been building a syndicate of local catchment investors planned to peak at 3,000, by JULY 1994, whose rights have been preserved to purchase 25,000 dollars worth of future shares at par, if and when an approved prospectus or other legal instrument is in place. The money to purchase shares comes from their 10 year capital guaranteed cash fund which … will generate to holders the required $25,000 …." (g) The link between the share options and syndicate membership and the Legal & General policy was described as late as 8 September 1993 in a seminar addressed by Glenn Ivers as follows [Ex C66]: "When you have that opportunity to come in and convert those options, you're going to have to do something and that something is, you're going to have to come up with $25,000.00 obviously, even to come in at par. So what we've done … We said look what we want is community ownership. What we want is a way where we can preserve these options for these families in a way that they can actually do it and actually cash in on some of the potential. … [T]his is for 3,000 people that aren't necessarily wealthy. For those people, what we've designed is a way where they could preserve the options and when the time comes ten years later, actually afford to be able to come in and buy those options and it's quite simple how it works. … Quite simply, Legal and General is simply a way for our members to save that $25,000 in a capital guaranteed cash fund that is secure. … … [W]hat that will do is in 10, 11 years' time, when the underwriter says 'okay, now's your opportunity families to come in and pick up those options at par', those families will be able to say 'Yes thank you very much, I'll do it.' … … [I]n respect to these 3,000 families, they also receive foundation life membership, it comes free simply by virtue of deciding to reserve these options …" 62 This was after IMB had assured the Commission it had changed its seminar presentations to make it clear that policy membership was not necessary to acquire the share units and syndicate membership. 63 It is not surprising that the respondents would link the right to the shares and membership in the club to ownership of a policy. It was, from the outset, in early 1991, right up to September 1993, essential to the success of the project that a large number of people take out policies. In the first phase to mid 1992, it was intended that funding to develop each stage of the project was to come from the policyholders taking out a series of loans against their policies and making each lot of loan proceeds available to IMB. IMB initially planned on no other source of funds to pay for construction of the facility. After Cowley came on the scene in mid 1992, IMB evaluated the prospects of ever obtaining sufficient policies quickly enough to be able to rely on policy loan moneys as a source of development funds as being remote and concluded that some other source of funding would have to be obtained. It appears that it was Cowley who suggested that the target of 5,000 policyholders should be reduced to 2,000, a figure no doubt considered to be achievable relatively quickly notwithstanding the poor performance to the end of 1991 of selling only about 450 policies, and who further suggested that 2,000 policies, if assigned to a financier, would be sufficient security to generate loan funds necessary to permit the development to proceed, with such other security over the physical assets of the project as IMB or the proposed public company could offer. The evidence shows that IMB made no provision for persons desirous of taking out shares in supporting the project, but not wishing to take out policies, until August 1993. 64 Following concerns expressed by the Commission about whether the respondents were making representations to the effect that the only way to obtain options to purchase shares in Logan Lions Limited was to sign up for a Legal & General investment policy, McCullough Robertson, solicitors for IMB, wrote to the Commission on 10 August 1993 informing it that changes had been made to the form of the presentation to ensure that members of the public were fully aware that options were available by methods other than obtaining a Legal & General Umbrella Financial Savings Plan. 65 At the seminar held very late in the piece on 8 September 1993, Glenn Ivers put to those attending that one advantage of becoming involved in the scheme by buying a Legal & General Investment Policy and thereby being guaranteed the right, when the proposed company was floated in ten years or so, to take up a parcel of shares at $1 in that company was the advantage of being able to decide whether to take up the $1 shares reserved for them at a time when they would know whether the shares were going to come onto the market at a premium or at a discount to $1. By buying a policy, people attending seminars were thus told that they could obtain that advantage over the position ordinary members of the public interested in acquiring shares in the float would be in at that time. 66 As IMB's then–solicitor Mr P McKnoulty pointed out in his evidence, such an advantage was illusory. The price the market was prepared to pay would only be known after subscriptions closed and the company was listed. The Commission's argument that s 47(6) was infringed by what Glenn Ivers said in September 1993 requires the advantage over ordinary members of the public he said would be conferred by policy ownership to be regarded as a "service", for the purposes of s 47(6)(a) and (7)(a). The term "services" is widely defined in s 4. But, in the context of s 47(6) and (7), it refers I think to services, including benefits, which the tying corporation is then able to supply or which it will be able to supply in the future, on performance of the condition by the offeree, not some service which the tying corporation is not able to supply at the time the conditional offer of supply is made and which it may never be able to supply. The object of s 47(6) and (7) is to prevent the supplier of particular goods or services desired by a consumer from having to take other, perhaps unwanted goods or services from a third party, in order to get the desired product. These provisions are not concerned with representational conduct consisting of statements about what the representer will do, but which it cannot now or may not be able in the future to do. That, as the Commission recognises in its pleading, is the concern of s 52 (and other provisions of Pt V the TPA). The question whether this particular representation infringes s 52 has been raised by the Commission. 67 The Commission also submits that the offer by IMB of life membership (a right of variable content during the period early 1991 to September 1993) in "the syndicate" or in the "Logan Lions Rugby League Club" to people who purchased a policy also amounts to a contravention of s 47(6). This too was an illusory offer. It could not be seen as an offer that IMB would provide life membership or, even after Logan Lions Limited was incorporated, that the latter company would provide life membership to policy purchasers. The "Members Information Portfolio" document, at p 12, identifies "the Club", not yet in existence, as a separate organisation from the company. The document says that the Club facilities will be owned outright by that company and that the company will manage the Club under a management agreement. But it does not suggest that the company is intended to have power under the management agreement to do anything more than operate the Club's facilities. It does not suggest that the Club will merely act as the company's creature in determining such matters as club membership. It is apparent that, in some of the material distributed and information given to potential investors in the scheme, IMB did make statements linking life membership with purchasing (and retaining) a policy, even though the Ivers, in their evidence, acknowledged that the question of life membership was really one which only the Club, after it was formed, could determine. Oral evidence from a number of witnesses, including policy purchasers, also acknowledged that this was their understanding. 68 Life membership could only be offered by the committee of the rugby club yet to be formed. The membership offer could at most, therefore, be an offer by IMB (or perhaps also by Logan Lions Limited, after its incorporation) to use its best endeavours to ensure that persons purchasing a policy at the behest of IMB would be given life membership in the club yet to be formed. A promise by IMB to use its best endeavours to procure membership from another at some time in the future does not, I think, come within the term "services" in s 47(6) and (7) as defined in s 4. As the definition shows, the expression "services" covers such things as rights and benefits which the tying corporation is in a position to supply, either immediately or under an offer if that offer is taken up. "Services" here do not include benefits etc which the tying corporation is or will not be in a position to supply. The problem with the Commission's submission here is emphasised by s 47(7). It is difficult to see that conduct by IMB, constituted by its refusing to make an effort to procure life membership in a club yet to be formed for a person unless that person buys a policy from Legal & General, when there is no certainty that IMB will be able at some time in the future, by its efforts, to procure that membership, can come within s 47(7). As the Commission by pars 18 and 31 of its pleading acknowledged, s 52 is an apt vehicle for dealing with representations made in trade by a corporation as to what it will do in the future that does not have the capacity to make good those representations. There is no need to press s 47(6) and (7) beyond activities they clearly cover into such an area. 69 The Commission, however, did not, in its closing submissions, seek to make good its s 52 case (or its s 53(f) case) based on the conduct in pars 19 and 20 of its pleading. 70 The critical issue raised by the Commission's allegations that the respondents' engaged in third line forcing is whether statements made by the respondents of the kind contained in, eg, the "Members Information Portfolio" document, to the effect that only policyholders were to be given the opportunity to subscribe for shares in the proposed company which would operate the project and that life membership was dependent on policy ownership, involve conduct contravening s 47(6) or (7). 71 The respondents submit that they did not engage in third line forcing: "5.2 … We say that the only good or service which was offered by IMB was the opportunity to join a syndicate of people who had each taken out a Savings Plan Policy in their own name, with the common goal of helping to establish the facilities which we proposed. 5.3 We say that the opportunity for syndicate members to take up shares or life membership would become available if and when the development proposal was in a position to proceed, and if the syndicate member chose at the time to take that opportunity. 5.4 Further, the offer to take up shares would be made by the public company formed for the purposes of undertaking the development, not by IMB, and the offer of life membership would be made by the intended Incorporated Association which would be formed by the Syndicate members themselves, not by IMB." Third line forcing – separate products OR A PACKAGE DEAL? 72 In order to establish third line forcing, there must be two discrete products or services, with the supply of the first being conditional on the purchaser acquiring another product or service directly or indirectly from a third person. But the courts have refused to find that exclusive dealing is made out where a single package of products or services is supplied, even though different, unrelated organisations produce the various products or services making up the package and even though there is no reason, apart from the lead supplier's insistence on supplying only a bundled package, why the purchaser could not have made separate arrangements for acquisition of the different components of that package. 73 In Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 ("Castlemaine Tooheys"), s 47(6) was held not to be contravened by the supply of what was characterised as a single product, "delivered beer". The brewery brewed beer in Brisbane. It offered liquor retailers in North Queensland the choice of collecting beer from one of its regional depots in that area or having the beer delivered from the brewery. However, for practical reasons associated with the method of assessment of government licensing fees set out at p 399, retailers generally opted to have the beer delivered to them from the brewery. In this situation, the brewery insisted that it arrange delivery of the beer by its preferred carrier, an unrelated firm. The brewery (not the retailer) contracted with the carrier and was responsible for payment of the carrier's charges and property in the beer only passed to the retailers on delivery. On the brewery's invoices to retailers, however, freight was shown separately from the price of the beer to ensure that the retailers only paid licensing fees on the cost of the beer. A cartage contractor who wished to compete with the brewery's preferred carrier sought to restrain the brewery from supplying beer to retailers on condition that the latter would accept transport services from the preferred carrier on the ground that the brewery's conduct contravened s 47(6) and (7) the TPA. Gibbs CJ (with whom Wilson and Dawson JJ agreed) said (at 400 – 401): "[W]hen a retailer wished to have the beer delivered from the brewery, the appellant required, as a prerequisite to granting supply, that the appellant itself should arrange delivery. The appellant supplied the beer on that condition. However, the condition was not that the retailer should accept the services of Q.R.X. [the carrier engaged by the brewery]. The condition was that the appellant should arrange the carriage of the beer and should deliver it to the retailer, not at the brewery, but at the retailer's premises or some other place in North Queensland. In other words the condition was that the appellant would deliver the beer which it sold to its destination in North Queensland. It was of course clear that if the appellant had itself carried the beer there would have been no exclusive dealing within s. 47. The position was not altered when the appellant arranged for a third person to carry on its behalf. In those circumstances the services were acquired by the appellant and not by the retailer. No doubt in a loose sense the retailer received a benefit from the services, but in truth what the retailer acquired was the beer and not the services of the carrier. Certainly there was no condition that it should acquire (even in the sense of accept) those services. There can be no doubt that if the condition is that the services should be provided to the corporation which is alleged to be engaged in the practice of exclusive dealing there is no contravention of s. 47(6). … It is made clear by s. 47(10) that the question whether the conduct in question does have [the effect of lessening competition] is not relevant when one is considering sub–ss. (6) and (7) of s. 47. Although the section may reveal a general purpose of proscribing practices which tend to lessen competition, that is no justification for departing from the words of the section, which significantly interferes with common law rights, and is in any case a penal provision: see s. 76 of the Act. The practice whereby a seller of goods arranges for their delivery by himself or an agent is ancient and well known, and if it had been intended to render that practice unlawful that result could have been achieved by the use of clear words." 74 Brennan J (with whom Deane J agreed) explained (at 405 – 406): "Once it is appreciated that the beer transported by Q.R.X. is supplied by the brewer to a licensee only at the licensee's premises, it is impossible to suppose that the transport services rendered by Q.R.X. are acquired by the licensee. The beer supplied at the licensed premises may be described as 'delivered beer' to distinguish it from beer at the brewery door, but the delivery services supplied by Q.R.X. are acquired by the brewery, not by the licensee. The licensee acquires only delivered beer … Here there is no contract or arrangement, whether direct or indirect, between a licensee who acquired delivered beer from the brewer and Q.R.X. pursuant to which the licensee acquires delivery services from Q.R.X. From start to finish Q.R.X.'s contract or arrangement is with the brewer alone. In so far as the licensee derives a benefit from the delivery of beer to his premises, he acquires that benefit from the brewer and not from Q.R.X. It is submitted that a person may acquire services simply by accepting them, and that a licensee accepts delivery services by Q.R.X. But a licensee does not accept any services from Q.R.X.; the licensee accepts the delivered beer supplied to him by the brewer. … The brewer does not seek to force licensees to accept the services of a carrier nominated by the brewer. The brewer simply asserts its right to choose the carrier to deliver its beer to the point of sale at the licensee's premises in discharge of its obligation to the licensee to deliver the beer there. The position is no different from what it would be if the brewer's own employees delivered the beer." 75 A similar approach was adopted in Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495 ("Paul Dainty"). Although this case involved third party forcing relating to the licensing of land or a building under s 47(8) the TPA, the same principles apply. (See Paul Dainty at 500.) The National Tennis Centre Trust ("NTC") had entered into agreements with the Victorian Arts Centre Trust to use its ticketing service, Bass, exclusively for all activities at NTC entertainment venues. When the plaintiff ("PDC") wanted to hire the tennis centre, a venue controlled by NTC, to put on one of its rock concerts, NTC required it to use the Bass ticketing service rather than PDC's own service, Ticket Master. The Full Court held (at 515) that NTC did not infringe s 47(8). What it offered to supply was a single package of services, ie, a "fully ticketed venue": "There is, in our view, no reason to assume that a relationship of principal and agent arises between promoter and venue for purposes of ticket sales. The contract for the hire of the venue is, on its face, a contract between principals for the hire of a ticketed venue – one which provides all its own ticketing facilities. It is a 'package deal' which, in addition to ticketing, covers such matters as catering, program selling and security services." 76 The Full Court (at 498) recognised that it would be necessary to scrutinise package arrangements to ensure that they were not artificially structured to avoid the reach of s 47(6) and (7) and related provisions: "The courts, while being alert to detect sham or artificially contrived arrangements, must do their best to apply the provisions of the enactment to the particular facts before them. It is difficult in such cases to argue usefully by analogy or by extrapolation." 77 The concept of "sham" is well understood as involving arrangements between parties who intend that the real arrangements between them will be different from those reflected in the documents they present to third parties. It is more difficult to identify what might amount to an "artificially contrived arrangement" which will not escape the reach of s 47(6) and (7). In Castlemaine Tooheys the brewery was able, without infringing these provisions, to insist that retailers could only have its beer if they also accepted delivery by the brewer's preferred carrier (and of course paid the carrier's freight charges over which the retailers had no influence but which were set by agreement between the brewery and the only carrier it was prepared to favour with its business). In Paul Dainty, NTC was able to insist that anyone wishing to hire its venue had to take the venue NTC supplied together with a range of services supplied by others over whose charges to NTC, passed on to the hirer, the hirer of NTC's venue had no influence. Both arrangements denied the purchaser the opportunity to negotiate with others better freight terms and booking fee terms; both gave the brewery and NTC the opportunity to inflate their own profits by insisting on selling only their products bundled with those of their favoured suppliers. The purchasers in both cases would have made their own arrangements if they had been free to do so. They sued for that freedom. Yet neither arrangement can be regarded as an artificially contrived one within that concept as described in Paul Dainty. 78 As these cases show, it is essential to correctly characterise the subject matter of the supply or the offer said to involve a contravention of s 47(6) or (7). There is a good deal of room for judgment in determining whether to characterise an arrangement as involving a package deal offered only by the one supplier and thus outside s 47(6) and (7) or as involving an arrangement between the offeror company and the offeree and a separate arrangement between the offeree and the third party. The arrangement in Castlemaine Tooheys under which the brewery arranged and paid the carrier its freight charges could easily have been characterised as an offer to sell its beer to North Queensland retailers (who for practical reasons had to buy it delivered to their premises) on condition that they acquire the services of the brewery's third party carrier indirectly through the brewery, ie, as conduct within s 47(6). The arrangement in Paul Dainty could, with the same ease, have been similarly characterised. 79 IMB told people that they could only participate in the scheme by having a parcel of shares reserved for them and by acquiring life membership in the club yet to be formed, if they purchased a policy from the particular insurer nominated by IMB. But Castlemaine Tooheys and Paul Dainty show that insistence by the supplier of a product or a service on the purchaser also taking the product or service of a third party is not necessarily sufficient to bring the case within s 47(6) or (7). These decisions might be thought to be explicable on the basis that the supplier offered to enter into a single packaged contract with the purchaser and that the arrangement did not therefore involve the purchaser entering into separate contracts with the tying supplier and the tied supplier. But the courts in Castlemaine Tooheys and Paul Dainty did not base their decisions that there was no infringement of s 47(6) upon that ground. In both cases, the courts looked at the entire factual matrix in which the conduct said to infringe the sub–section occurred and arrived at their determination on an evaluation of that, not on the simple ground of whether the arrangement involved the purchaser contracting with one supplier or two separate suppliers. In Paul Dainty, the court (at 503) identified "the crucial question" as whether services (by way of the sale of tickets to spectators) were being provided by Bass indirectly to PDC for the reason that, if Bass was providing those services to PDC, then they were being forced on PDC by NTC. The court held (at 504) that Bass was not supplying any services to PDC because: "There seems, on analysis, to be no good reason to assume a tacit contract between the promoter and the members of the public who purchase tickets [from Bass] for that particular show." 80 And (at 515) the court concluded: "There is, in our opinion, nothing in these agreements between the venue and the promoter, or the venue and the ticket–seller, to support the [promoter's] arguments that tickets for a performance, of their very nature, must be sold on behalf of the promoter or entrepreneur who arranges the performance. There is nothing unlikely or contrived about the arrangements set out. The respective interests of spectators, promoter, venue and ticket–seller are all catered for in a perfectly reasonable way, which does no violence to principles of law or common sense." 81 Though the court paid close attention to the terms of the hiring agreement between NTC and PDC and the terms of the ticket–selling agreement between NTC and Bass, it resolved the case not by asking the simple question whether there was a single contract between NTC and PDC or two separate contracts, one between NTC and PDC and another between Bass and PDC. It is apparent that the court resolved the case by examining what was done in a practical sense though this, of course, involved looking at, among other things, the terms of the contractual arrangements between NTC and Bass and NTC and PDC. 82 The reason why the court did not adopt the simple approach of asking: is there one contract or two? appears from s 47(13). Whether a corporation has supplied services to a purchaser "on the condition" that the purchaser acquires goods or services from a third party, s 47(13)(a) requires the investigation into whether there has been supply on such a condition to be made having regard to the statutory direction that: "In this section: (a) a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having legal or equitable force or not, and includes a reference to a condition the existence or nature of which is ascertainable only by inference from the conduct of persons or from other relevant circumstances; …" 83 The provisions of Pt IV the TPA are concerned with whether the way business activities are arranged is restrictive of competition (whether the existence of such a restriction has to be the subject of proof or is, in the case of s 47(6) and (7), assumed to exist). Though the contractual form into which business activities may be structured is a relevant consideration in determining whether activities come within a provision in Pt IV, contractual form is not determinative of that. Part IV is concerned with a much wider range of activities than contracts in restraint of trade. 84 To make the application of s 47(6) depend upon the purchaser being required to enter into two separate contracts, one with the lead supplier, the other with the tied supplier, rather than into one package contract with the lead supplier, would also throw open the door to what could truly be said to be contrived arrangements to avoid the application of s 47(6). The tying and the tied suppliers will invariably be co–operating with each other. The tying supplier could, therefore, readily procure the support of the tied supplier to force the latter's goods or services on the purchaser as part of a single package contract offered only by the tying supplier, thereby easily circumventing s 47(6). 85 It is not, however, accurate to describe IMB's actions as comprising of the offer of the opportunity to acquire shares in the company which it proposed to establish and the offer of life membership on condition that the persons to whom these offers were made purchased an investment policy from National Mutual or Legal & General. More accurately, the condition insisted on by IMB was that the persons to whom IMB offered these future benefits had to purchase a National Mutual or Legal & General policy from IMB. It was a critical element of the arrangement that offerees would not just acquire an investment policy from National Mutual or Legal & General, but would purchase that policy through one organisation and one organisation only, viz, IMB, the same organisation that was also offering the benefits of the opportunity to acquire shares and life membership in the future. 86 IMB required policies to be purchased through it not just so that IMB would get the commissions, but to enable it to make available in the future the two benefits it offered. The commissions were necessary to enable IMB to advance the scheme to the stage where purchasers would be able to realise the opportunity IMB was offering them. The commission income enabled IMB to recruit, through what became its elaborate sales organisation, more and more purchasers of policies and thus to increase the aggregate loan or security value IMB needed to fund implementation of the scheme. IMB also had to be the supplier of the policies to purchasers to give it the opportunity to ensure that purchasers would keep them up and would elect to make them available to the scheme as development proceeded: a policy owner was under no enforceable obligation to do either. But a voluntary willingness to do so was essential to fund implementation of the scheme. 87 IMB went to great lengths to persuade policyholders to keep them up. It was able, by various means, to achieve a low lapse rate. The actuary, Mr Wood, gave evidence that statistics produced by the Insurance and Superannuation Commission Life Insurance Group showed that, in the twelve months to June 1991, the whole of industry lapse rate on investment policies of the kind sold by IMB was 19 percent, with the average for National Mutual being 16 percent and for Legal & General, 24 percent. The lapse rate for policies sold by IMB in connection with its scheme was 8 percent, considerably lower than the 19 percent industry average, half the National Mutual 16 percent average and only one–third of the 24 percent average for Legal & General. The memorandum of 18 October 1991 relied on by the Commission deals with the lapsing of thirty–three National Mutual policies in the period between IMB first selling such policies and 18 October 1991. This is nearly the whole of the period during which IMB sold National Mutual policies, 453 in all. Assuming, say, 400 policies had been sold up to 18 October, thirty–three policy lapses is only about 8 percent. IMB put in evidence a record of interview between the Legal & General Queensland State Manager and Commission officers that deals with the lapse rate of Legal & General policies sold by IMB. It refers to the sale to date of 1,600 to 1,700 policies since 1992 and records that: "The lapse rate for the product is quite good, at about 8% or less". Overall, Wood acknowledged that "the lapse experience of policies sold by the IMB Group … prior to the investigation … had been good, in other words, relatively low". (This is so whether the relevant kind of policy be regarded as an "endowment" or an "investment account" policy.) 88 One of the techniques IMB used to achieve these low lapse rates was to establish a public relations division. At one stage, this had five full time staff. Its job was to deal with problems encountered with policyholders. These ranged from a policyholder missing a payment to a policyholder deciding that he or she did not want to continue any more with the policy. It appears that a good deal of assistance was given by these IMB personnel to policyholders who encountered financial difficulties: they arranged reduced premium payments, moratoriums on premium payments and they arranged for some policyholders to take loans out against their policies. Another technique was to keep policyholders informed by newsletters and information seminars of the progress of the scheme. All this may also have assisted IMB in keeping policy owners interested in the project and thus more likely to make their policies available for funding development when called on. 89 Not only did IMB have to keep the level of policy lapses as low as possible, it also had to undertake the onerous task of arranging and administering the large number of policy loans expected under the funding model to mid 1992 and the large number of policy assignments under the second funding model. As it said in one of its brochures about the first funding model, IMB would be responsible for ensuring the "proper maintenance of each of the 5,000 investment accounts" as well as making "all necessary arrangements for the Loan Backs at each of the three stages of development". [Ex C8 tab 5] Implementation of the Logan Lions scheme, based as it was on a large number of policies sold at different times over a period of a couple of years, involved a very substantial logistical effort. No one other than IMB would do that (though the insurer would have to process loan applications sent to it by IMB). That IMB may well have had this logistic capacity is suggested by its ability to enlist the support of so many witnesses for it in this action and its ability to gather and marshal their evidence in presentable form. 90 To say that, because IMB supplied policies as agent for National Mutual and Legal & General, the offerees acquired the policies "indirectly" from the insurers within the meaning of that term in s 47(6) and (7) ignores a critical element of the arrangement, viz, that the ability of IMB to make the promised shares and life membership available was dependent on it, and it alone, supplying the two insurers' policies to the participants in the scheme. What was being offered by the respondents can be more accurately characterised as a single package rather than separate services, some from IMB and others from National Mutual and Legal & General. What IMB offered was the opportunity to acquire shares and life membership on condition that the particular insurance policies IMB needed to sell to generate that opportunity were acquired through it. 91 That these insurance policies were themselves to be supplied by National Mutual and then Legal & General does not stand in the way of IMB's offer, so characterised, being the offer by IMB of a package deal. Section 4C the TPA provides: "In this Act, unless the contrary intention appears: … (c) a reference to the supply or acquisition of goods includes a reference to the supply or acquisition of goods together with other property or services, or both; (d) a reference to the supply or acquisition of services includes a reference to the supply or acquisition of services together with property or other services, or both; …" 92 Of s 4C(c), Wilson J said, in the Castlemaine Tooheys case (at 402 – 403): "The Act clearly contemplates that services may accompany the supply of goods in such a way as to constitute a single transaction properly described as a supply of goods. It follows that an act or series of acts, once characterized for the purposes of the Act as a supply of goods, cannot also be a supply of services … Here the transactions under scrutiny encompass no more than the supply of goods. The beer was to be supplied at the premises of the retailer. Each supply was a single transaction which could not be broken up into its several elements of sale and delivery without doing violence to the reality. Delivery to the premises was an essential and therefore inseparable concomitant of the supply of the beer. In different circumstances it might well be appropriate to characterize the delivery of the goods as the supply of a service. But not here. No question of supplying a service arises." 93 Applying this approach to s 4C(d), it can be said that the services to be supplied by the insurers accompanied the supply of the different services offered by IMB in such a way as to constitute a single transaction properly described as the supply of services by IMB. 94 The offer made by IMB cannot be said to be an artificially contrived arrangement of the kind the Full Court had in mind in Paul Dainty as incapable of escaping the reach of s 47(6) and (7). IMB had good grounds for insisting that the policies be acquired from it. That IMB nominated first National Mutual and then Legal & General as the only insurers from whom people could purchase policies necessary to their participation in the scheme is, in my opinion, no more capable of attracting the operation of either s 47(6) or (7) than was the brewery's insistence, in Castlemaine Tooheys, that retailers have their beer delivered only by the brewery's nominated carrier or the NTC's insistence, in Paul Dainty, that anyone wishing to hire their venue should also take (and pay for) the services of the Trust's nominated ticketing agent and catering and other services. 95 In KAM Nominees Pty Ltd v Australian Guarantee Corporation Ltd (1994) 51 FCR 338 ("KAM Nominees"), I said (at 343) that the views of Smithers J and Northrop J in SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 32 ALR 365 were consistent in that: "Both members of the Court were … saying that s 47(6) of the Act applied only if the third line forcing party's conduct amounted to it saying to the consumer: 'you do not have to acquire any goods or services from me, but if you want them from me, you can only get them if you will acquire other goods or services from a third person.'" 96 The difference between IMB's situation and the finance company whose position I considered in KAM Nominees is that the finance company was not dependent upon the prospective customer acquiring a car to enable it to bring into existence the service it was offering: the finance company had plenty of money to lend, but chose to lend it only to borrowers prepared to expend the loan moneys with nominated third party suppliers. IMB had nothing to give participants in the scheme, only the opportunity of getting something of value from the scheme – shares, life membership – if the participants together provided IMB, not the insurers, with the means of raising the funding required to implement the scheme. 97 There is another reason why I do not think IMB's conduct the subject of the Commission's complaint infringed s 47(6) or (7). 98 In Trade Practices Commission v Legion Cabs (Trading) Co–operative Society Ltd (1978) 35 FLR 372, Franki J considered the meaning of the words "directly or indirectly" in what was then s 47(4) of the TPA. He limited the expression, an acquisition of goods or services "indirectly" from the second supplier, now found in s 47(6) and (7), to an acquisition from an agent of that other supplier, saying (at 381): "… when s. 47 (4) of the Act [now s 47(6)] refers to the acquisition of goods directly from a second person it refers to the acquisition of goods from that person and when it refers to the acquisition of goods indirectly from a person it means an acquisition of goods from an agent of that person." 99 I doubt that the "directly or indirectly" dichotomy in s 47(6) and (7) is limited, as Franki J suggests, to acquisition under a contract with the second supplier, on the one hand, and acquisition under a contract made with an agent for the second supplier, on the other, ie, that an agent who supplies the goods of another can only ever be involved in the indirect supply of those goods by its principal and can never itself directly supply those goods. I do not think the term "indirectly" in the context of the old s 47(4) or the new s 47(6) and (7) can be limited so that only acquisitions from an entity in the particular legal relationship of agent to the other supplier are covered. To limit the expression "indirectly" in s 47(6) and (7) to the supply of goods or services by an entity who is the legal agent of the second person, I think, runs contrary to the discernible legislative intent that these provisions, like many of the provisions in the TPA, are to have a wide reach. That appears from the extended definitions of the expressions "goods", "services" and "supply", central to the operation of the provisions of Pt IV the TPA, including s 47(6) and (7). It is plain, I think, from the definition of "supply", from the definition of "services", from the definition of "acquire" (expanded even further by s 4C) and from the terms of s 47(6)(c) and (7)(c), which extends to "giving" or "allowing" discounts etc, that these sub–sections are not confined in their operation to the provision of goods or services under legally binding contractual arrangements only. 100 There is therefore no reason, in my opinion, to say that the concept of indirect acquisition "from another person" in s 47(6) and (7) refers to acquisition only from an entity which is in a legal relationship of agency with that other person. I think the term "indirectly" has the wide meaning it bears in ordinary speech: "coming or resulting otherwise than directly or immediately, as effects, consequences, etc". The Macquarie Dictionary, 3rd ed. In my opinion, when a question arises whether, in the context of s 47(6) or (7), a person has been offered goods or services by corporation X on condition that the person acquire other goods or services of a particular kind or description "indirectly" from Y, the question for the decision–maker is not whether the legal relationship of agency exists between the entity who delivers the goods or services of that kind or description and Y. Instead, the decision–maker must consider the facts of the case to determine whether the acquisition of those goods or services from the intermediate entity can be said to be an acquisition indirectly from Y within the ordinary meaning of that expression. Assume that the organiser of a public event, who does not sell liquor, obtains a payment from a brewery in return for the organiser offering catering outlets at the event to hirers on condition that they sell only X brand beer. The outlet hirers will have to procure that beer from someone other than the events organiser. Whether those hirers acquire their supplies of X brand beer directly from the brewery or indirectly from the brewery's agents or indirectly from liquor outlets that have purchased and own stocks of X brand beer, the organiser would, I think, contravene the sub–section. 101 Even though IMB sold the National Mutual and the Legal & General policies as agent for each insurer, the need for persons to buy those policies from IMB in order for IMB to be able to advance the scheme, I think, justifies the conclusion that the purchasers acquired their National Mutual and Legal & General policies directly from IMB for the purposes of s 47(6) or (7). For this reason, neither provision was infringed here. THE INSURANCE CONTRACTS ACT 1984 (CTH) 102 There is a question whether the Commission's action, in so far as it seeks orders on the ground that the respondents engaged in unconscionable conduct within s 51AB the TPA and on the ground that the respondents made representations in contravention of s 52 of that Act was barred by s 15 the Insurance Contracts Act 1984 (Cth). In the form in which s 15 stood between 1985 and April 1994, it provided: "Certain other laws not to apply 15. (1) A contract of insurance is not capable of being made the subject of relief under: (a) any other Act; (b) a State Act; or (c) an Act or Ordinance of a Territory, being an Act or Ordinance that provides for relief – (d) in respect of harsh, oppressive, unconscionable, unjust, unfair or inequitable contracts; or (e) from the consequences in law of making a misrepresentation. (2) Without limiting the generality of paragraph (1)(d), the nature of the relief to which that paragraph applies includes relief by way of variation, avoidance or termination of a contract." 103 Amendments were made in April 1994. It has since then provided: "15 Certain other laws not to apply (1) A contract of insurance is not capable of being made the subject of relief under: (a) any other Act; or (b) a State Act; or (c) an Act or Ordinance of a Territory. (2) Relief to which subsection (1) applies means relief in the form of: (a) the judicial review of a contract on the ground that it is harsh, oppressive, unconscionable, unjust, unfair or inequitable; or (b) relief for insureds from the consequences in law of making a misrepresentation; but does not include relief in the form of compensatory damages." 104 The first question is whether the pre–April 1994 version of s 15 is the one of relevance to this case (as the respondents contend) or whether the current version that came into force in 1994 is the relevant one (as the Commission contends). 105 In my opinion, a contract of insurance is "made the subject of relief under" another Act within the meaning of that expression in s 15 the Insurance Contracts Act when the action in which such relief is claimed is commenced (either by filing the originating application or by amending that application to claim such relief for the first time). That expression in s 15(1) is well capable of carrying that meaning. I do not therefore accept the Commission's submission that the bar created by s 15(1) only applies at the end of litigation when the form of the relief to be granted has to be considered, ie, I do not accept that a person is free to commence an action in which a contract of insurance is made the subject of relief under another Act and to prosecute that action through to the end of a trial, only to be told then that s 15 bars the person from obtaining the judgment granting relief which the Court thinks the person should have. Since s 15(1) the Insurance Contracts Act, in its pre–April 1994 form, destroyed the cause of action otherwise available under any other Act, it is s 15(1) in that form which governs the present case. (However, for reasons that follow, I do not think the ultimate result would be different if s 15(1) in its current form was the applicable provision.) 106 The object of s 15, in its pre–1994 form, appears from its face to be to bar reliance by a party to a contract of insurance on any other Act (Commonwealth or State) that provides for: (a) relief "in respect of" harsh, unconscionable etc contracts, being contracts of insurance; or (b) relief from the consequences in law of making a misrepresentation with respect to a contract of insurance. 107 A party who wants relief of either kind in relation to a contract of insurance can only seek that relief to the extent that it is available under the Insurance Contracts Act. Section 15, however, does not go beyond that. It does not bar a party to a contract of insurance from relying on another Act to seek relief of any kind other than the kinds the subject of s 15(1)(d) and (e). It does not seek to impose on the parties to a contract of insurance a statutory regime that replaces the contractual relationship entirely. 108 That that is the object of s 15(1) is confirmed by cll 38 to 40 of the Explanatory Memorandum to the Insurance Contracts Bill 1984. Commonwealth and State laws were not uniform in the remedies they gave in respect of harsh and unconscionable contracts, including contracts of insurance, and in respect of making provision for relieving a party who had made a misrepresentation in relation to a contract from the consequences of the misrepresentation, eg, from rescission of the contract by the insurer, where the contract in question was one of insurance. Parts IV and V the Insurance Contracts Act contain numerous provisions modifying the insurer's contractual rights to refuse indemnity under a contract of insurance, either by cancellation or otherwise, including numerous provisions governing the kinds of misrepresentations by insured persons which will entitle the insurer to refuse indemnity. The legislative intention of s 15 was to make the Insurance Contracts Act the sole source of power to grant relief in respect of harsh and unconscionable insurance contracts and the sole source of power to grant relief to insured persons who had made misrepresentations inducing insurers to enter into contracts of insurance which the insurers later sought to avoid because of the misrepresentation. 109 In my opinion, s 15 was amended in April 1994 to clarify that this was the legislative intent from the outset. 110 An Act will provide for relief in respect of unconscionable contracts within s 15(1)(d) the Insurance Contracts Act not only where the contract as concluded contains provisions that operate unconscionably on one party, but also where the contract was concluded in circumstances involving unconscionable conduct by one of the parties. The Contracts Review Act 1980 (NSW), by s 7, empowers a court to provide a range of remedies if it finds "a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made". The expression "unjust" is defined in s 4 to include "unconscionable, harsh or oppressive". Section 9 lists at length the factors to be taken into account in determining whether the contract was unjust at the time it was made. They include many factors affecting the parties during the pre–contract negotiation process. See N Sneddon et al, Cheshire & Fifoot's Law of Contract, 7th Aust ed (1997) Butterworths, NSW at pars 15.20 to 15.22. In West v AGC (Advances) Ltd (1986) 5 NSWLR 610, McHugh JA, Hope JA agreeing, said of the New South Wales Act (at 620): "Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract … More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances." 111 A contract procured by the unconscionable conduct of an insurer or its agent can, I think, be said to be an unconscionable contract within s 15 the Insurance Contracts Act. By force of s 15 the Insurance Contracts Act, relief under s 7 the Contracts Review Act (1980) (NSW) cannot be claimed in respect of contracts of insurance. 112 Though a contract can come within s 15(1)(d) as an unconscionable contract because of conduct leading up to the making of the contract and not because of any of the provisions of the contract itself, s 15(1)(d) only operates to bar an action under another Act where there is in existence a concluded contract. It does not bar an action under another Act that provides for relief in respect of unconscionable conduct that does not involve the conclusion of a contract. That approach gives proper effect to s 15. Parts IV and V the Insurance Contracts Act are all directed to modifying the rights of the insurer and the insured under concluded contracts of insurance. 113 The TPA was, in the pre–1994 period, an Act that did, in Pt IVA ("Unconscionable conduct") and in Pt VI ("Enforcement and remedies"), provide for relief in respect of unconscionable contracts of insurance in that relief could be obtained from such a contract where the making of that contract involved unconscionable conduct by a party such as an insurer. An injunction restraining enforcement by the insurer of such a contract or a provision of that contract could be obtained under s 80, though no relief in respect of an unconscionable contract of insurance could be obtained under s 87, by reason of s 87(1E). None of the various forms of relief in respect of unconscionable contracts of insurance that would have been available under the provisions of Pt VI (other than s 87) the TPA could therefore be sought under the TPA: s 15 the Insurance Contracts Act barred the bringing of such an action, in so far as relief in respect of an unconscionable contract of insurance was claimed in the action. 114 Section 87(1E) appeared in the TPA until its repeal by the Insurance Laws Amendment Act (No 2) 1994 (Cth) in April 1994, which also made the amendments referred to to s 15 the Insurance Contracts Act. But the existence, to 1994, of s 87(1E) specifically excluding relief under s 87 in respect of unconscionable contracts is not, I think, a ground for holding that, to that date, s 15 the Insurance Contracts Act did not bar an action brought under Pt IVA the TPA in which an injunction was sought under s 80 restraining a party from enforcing an unconscionable contract of insurance. The express exclusion by s 87(1E) of relief under s 87 the TPA, based on conduct of the respondent contravening Pt IVA of that Act in respect of contracts of insurance, is not a sufficient reason for reading down the general words of s 15(1)(d) the Insurance Contracts Act itself in its pre–1994 form so as to exclude its action–barring on all proceedings on contracts of insurance made in circumstances involving unconscionable conduct within Pt IVA the TPA. 115 The TPA, for the reasons given, is an Act within s 15(1)(d) the Insurance Contracts Act and it follows that no action could be brought by the Commission under the TPA for relief in respect of an unconscionable contract of insurance. 116 The TPA is not, however, an Act that provides for relief from the consequences in law of making a misrepresentation with respect to contracts of insurance. By force of Pt V ("Consumer protection") and Pt VI, the TPA gives a range of remedies in respect of various classes of representation made in trade or commerce. But such relief is confined to protecting the person to whom the representation was made from the actual or likely future harmful consequences of the representation. There is no provision in the TPA which gives relief from the consequences in law of making a misrepresentation, ie, relief to a person who makes a misrepresentation, whether in relation to a contract of insurance or any other contract or transaction. Section 15(1)(e) the Insurance Contracts Act in its pre–1994 form therefore did not bar the making by the Commission of any of the claims raised in its originating application that were based on representations made by the respondents that contravened s 52 the TPA. UNCONSCIONABILITY: CAMU COMMUNITY 117 The Commission alleges in its current statement of claim filed 6 October 1999: "36. Further, to induce members of the Aboriginal Community at Camu near Kennedy in North Queensland to invest in 'Umbrella Financial Plans', in or about August, 1992 the first respondent by the fourth respondent and the twelfth respondent made representations in terms of or similar to those alleged in paragraphs 21, 22, 24 and 26 to 29 inclusive. 37. (a) Many members of the Camu Community referred to in paragraph 36: (i) were to varying extents unable to read or write and lacking formal education; (ii) had little or no understanding of the nature of insurance and investment products such as the 'Umbrella Financial Plans'; (b) The fourth respondent was in a position to exercise influence over members of the Camu Community; (c) The fourth respondent and the twelfth respondent had a significant financial interest in procuring members of the Camu Community to invest in 'Umbrella Financial Plans'; (d) In the premises, by reason of: (i) the inequality of the bargaining powers of members of the Camu Community and the fourth respondent and the twelfth respondent; (ii) the fact that the representations referred to in paragraph 36 were misleading and deceptive or likely to mislead or deceive, the conduct referred to in paragraph 36 was unconscionable." 118 In its original statement of claim filed in October 1993, with its originating application, the Commission, in pars 18 and 22, made an allegation of unconscionable conduct similar to that now contained in pars 36 and 37 of its current pleading. It was alleged in par 18 that, in order to induce members of the Camu Community to purchase Legal & General investment policies, the fourth and twelfth respondents made certain representations; in par 22, it was alleged that, by reason of the matters there set out, the making of those representations was unconscionable. In the originating application, an injunction was sought against all thirteen respondents restraining them from "making the representations alleged in paragraphs 17 and 18 of the Statement of Claim". [Originating application at par 1] Injunctions were also sought restraining the IMB respondents and Legal & General, first, from promoting investment and, second, from accepting applications to invest in umbrella financial plans as a means to fund the acquisition of any interest in the third respondent. [Originating application at pars 2 and 3] 119 The unconscionability allegations in pars 18 and 22 of the original statement of claim are one of the factual bases relied on to justify all these claims for injunctive relief. No relief, however, was sought against IMB in respect of the small number of contracts of insurance into which a total of about twenty members of the Camu Community entered. The reason, no doubt, is that orders were sought against Legal & General requiring it to interview each person who had invested in one of its umbrella financial plans, through the agency of IMB, including those at Camu, give them certain advice and repay "to any policyholder desirous of terminating an 'Umbrella Financial Plan'" an amount in respect of all premiums paid. [Originating application at par 6] Similar relief was sought against National Mutual. The Court's power to grant the relief sought in par 6 comes from s 87 the TPA. It is available only in respect of conduct contravening Pt V. None of the relief sought in the originating application can be characterised as relief sought in respect of unconscionable contracts of insurance under the TPA, though that is an Act that provides for relief in respect of that kind of contract. 120 The relief sought now in the amended application includes an injunction restraining the respondents from engaging in conduct alleged in the current statement of claim in contravention of the TPA and a declaration that the respondents contravened the TPA in the respects alleged in pars 19 to 37 of the amended statement of claim. The injunction sought thus includes a restraint under s 80 the TPA on the respondents from engaging in unconscionable conduct of the kind the subject of pars 36 and 37 of the Commission's latest pleading. The Commission also now seeks declaratory relief that extends to the Court declaring that, by making certain of the representations alleged in the current statement of claim in or about August 1992 to induce members of the Camu Community to buy investment policies from IMB in the circumstances alleged in par 37 of the pleading, the respondents engaged in unconscionable conduct in contravention of s 51AB the TPA. Section 163A the TPA empowers the Court to make such a declaration, even though the claim in that behalf was only raised during the course of the trial by way of amendment to the application. The relief now sought is all directed to conduct of the respondents, including conduct said to have been engaged in for the purpose of inducing those members of the Camu Community, and others, to enter into contracts of insurance through the agency of the respondents. But no relief is sought in respect of any of the small number of contracts of insurance entered into by members of the Camu Community whether on the ground of unconscionability or otherwise. 121 For the reasons given, s 15 the Insurance Contracts Act, in the form it was then in, did not bar the Commission from commencing these proceedings against the respondents for the relief contained in pars 1 to 3 of the originating application, even though the claims for such relief were based, in part, on what was said to be unconscionable conduct by the respondents with respect to members of the Camu Community. For the same reasons, the claims for injunctive and declaratory relief contained in the current application and raised by way of amendment were not barred by s 15 the Insurance Contracts Act as then in force. 122 The Commission's claims for declaratory relief in relation to the Camu Community, based on Pt IVA, therefore require resolution. 123 Section 52A, inserted into the TPA in 1986, proscribed unconscionable conduct. Section 52A was renumbered as s 51AB and a new subsection (7) added by the Trade Practices Legislation Amendment Act 1992 (Cth), which came into effect on 21 January 1993. At the relevant time, August 1992, s 52A provided: "(1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has contravened sub–section (1) in connection with the supply or possible supply of goods or services to a person (in this sub–section referred to as the 'consumer'), the Court may have regard to – (a) the relative strengths of the bargaining positions of the corporation and the consumer; … (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of goods or services …" 124 The TPA does not define the term "unconscionable." Section 52A is directed at conduct which, while not necessarily misleading or deceptive, is clearly unfair or unreasonable. In general terms, conduct will be regarded as unconscionable where, in accordance with the ordinary concepts of mankind, it is so against conscience that the court should intervene: Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 at 463; Hurley v McDonald's Australia Ltd (2000) 22 ATPR 41–741 at 40,585 – 40,586. This is a matter for the courts to determine on the facts of the particular case. Section 52A(2) contains a non–exhaustive list of considerations to which the court may have regard, although the court is entitled to take other considerations into account as it thinks fit. The equitable doctrine, as outlined in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447,can provide guidance, according to the circumstances of the case, as to whether conduct in question is unconscionable. The common characteristic of the situations in which a court of equity will grant relief on the ground of unconscionable conduct is that they have the effect of placing one party to a transaction at a serious disadvantage to another: Blomley v Ryan (1956) 99 CLR 362 at 405 per Fullagar J. In the same case, Kitto J said (at 415): "[The court has power to set aside a transaction] whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands." 125 Camu is an Aboriginal co–operative community which runs two banana farms located approximately ten kilometres north of Cardwell near the township of Kennedy. The Community owns residential units which are rented to its members. It was established in the 1980s by Backo's mother, Mrs Evelyn Scott, who in August 1992 was head of the Reconciliation Council. 126 In about August 1992 Glenn Ivers and Backo visited the Camu Community. Steven Mothe, the administrator of the Camu Community, and Mrs Doreen Shepherd, the Community treasurer/secretary, were both related to Backo. Mothe knew of Backo's reputation "as a famous football player" but did not then "know him to talk to". It was necessary for Ivers and Backo to obtain approval from Mothe or Shepherd before they could speak to members of the Camu Community. In the course of the visit, Backo and Ivers conducted a seminar promoting the 2001 Rugby League Syndicate to thirty to forty members of the Community. Backo took the prominent role at the IMB presentation. Copies of the "2001 Rugby League Syndicate – Members Information Portfolio" document [Ex C8 tab 15] were handed out by Backo to members of the Camu Community. They sold a small number (about five) of the Legal & General policies. Mothe and Shepherd both bought one, as did a group of fourteen individuals who bought a single policy under the name of the "Jabiru syndicate". 127 The Commission submitted that the promotion of the 2001 Rugby League Syndicate, promises of membership benefits, gold card discounts and sale of policies by Backo and Ivers to the members of the Camu Community involved "appalling exploitation". Despite taking this view of the conduct of Backo and Ivers, the Commission elected not to call any evidence of its own in support of the allegations in pars 36 and 37 of the current statement of claim. In the course of the respondents' case it elicited some evidence in cross–examination of Glenn Ivers and Mothe relevant to these allegations and it also put into evidence through Mothe the written statement it had obtained from him in 1993. 128 The Commission submitted that the members of the Camu Community were under a special disability known to the respondents, particularly Backo, in their dealings with Ivers and Backo by reason of: (i) Their limited literacy skills; (ii) Limited education; (iii) Limited exposure to matters of a complex commercial nature; (iv) Limited understanding of investment terminology and mechanisms; (v) Limited ability to afford what was being offered to them; (vi) Limited opportunity to receive the benefits of what was being offered in comparison to other members of the public, particularly members of the public resident in and near Logan City; (vii) The relationship that existed between them and Backo; and (viii) Backo's obvious profile and reputation in the community. 129 These circumstances were such, so it was submitted, that the conduct of the respondents in taking advantage of the special disability to sell the policies was unconscientious and in breach of s 52A (now s 51AB). 130 As to points (vii) and (viii), the fact that Mothe and Shepherd were related to Backo and Backo's standing as a professional footballer and the son of the founder must have assisted the respondents in attracting the interest of the thirty to forty Community members who attended the IMB presentation to the IMB scheme, as did the significant ties Backo had to the Camu Community through his mother. But those considerations by themselves are insufficient to show that the conduct of Backo and Ivers at Camu was unconscionable. As to point (vi), the prospect of any of the members of the Community obtaining a benefit from a club constructed at Logan City was fairly remote, as the Commission submitted, though it is apparent from Mothe's evidence that Community members are not all tied to Camu and, as Mothe appreciated, what was being offered was the opportunity to take up shares in the future and to save through an insurance policy. 131 But the disabilities that the Camu members who dealt with Ivers and Backo were under were not, I think, as dramatic as suggested by the Commission. Mothe was the only member of the Community whom I saw. He was not an inarticulate simpleton. It was apparent he had, as he claimed, a reasonable level of education. As to points (i) and (ii), Mothe, in cross–examination, said this: "As administrator, you … sometimes [members of the community] have to fill documents out and you help them fill the documents out?–––Well, this – some – sometimes we do, but a lot of the times they take their documents home and do it themselves. But there are some members of the community who don't read and write terribly well?–––Oh, I wouldn't say that. A lot of folks are really well educated in the community. I'm not suggesting that that's universal but there are some people in the community who maybe aren't as good as others?–––Probably the older – the real older folks, but the people that we had working on the farms they were pretty well educated. They knew what they were doing as far as reading and writing." 132 Glenn Ivers' evidence was to the same effect: "Mr Ivers, did you make any inquiry of the members of that community as to the level of their literacy?–––The level of their literacy was patently obvious from … the minute we walked [in] there. Doreen Shepherd and Stephen Mothe are well known to Sam, and had become known to me. They are both well – very articulate and educated people. They spoke on behalf of many members of the community. I was aware – and very much aware that some members of the community were not as literate as the general community, I suppose you might say, and that is why we took great pains to spend three or four hours there, discuss at length with those people, and allow the community leaders also to discuss any issues that they may wish to discuss. And my understanding is that we returned the next day and they had decided to pursue this method whereby some of them would form together and take out one policy." 133 This was the only evidence of these issues: none of it was contradicted. There is no evidence to establish point (v) and the issues raised by points (iii) and (iv) were but barely touched on in cross–examination of Mothe. 134 While no one suggests that the Community was made up entirely of sharp business people, there is no justification to assume, on the limited evidence before the Court, that the Camu Community conformed to the stereotype of a non–functional indigenous community subsisting on welfare benefits and open to exploitation. If the Commission had established by evidence that the Camu Community was like that, then there would be little doubt that Glenn Ivers and Backo's activities would warrant the Commission's description of "appalling exploitation". Residents, as I have said, were members of an Aboriginal co–operative community engaged in banana growing. Mothe said he joined the IMB scheme, not because of club membership, but because he thought the scheme offered a good investment opportunity. That contradicts point (vi) in the Commission's submission. He was aware, however, that investment success was not guaranteed and that the scheme was still "at the planning stage". The reaction of the thirty to forty of the Community who attended Ivers and Backo's presentation was that about twenty members, including the administrator Mothe and the treasurer/secretary Shepherd, bought a total of about five policies while ten to twenty other members were not persuaded to invest. That does not suggest an obviously gullible audience. The Community's response to the seminar does not appear, on the limited evidence available, to be much different from the reaction of Logan City residents who attended IMB seminars at Springwood. 135 Backo, though available to give evidence, did not choose to enter the witness box. No explanation was offered. But notwithstanding this, the state of the evidence is insufficient to justify a finding that the conduct of Ivers and Backo in promoting the scheme to the Camu Community was unconscionable within s 52A (now s 51AB) the TPA. Misleading and deceptive conduct 136 I turn now to the Commission's case based on s 52 the TPA. Though the Commission has abandoned reliance on a number of the representations originally complained of as constituting conduct infringing the section, it still maintains a fairly complicated case based on a large number of written and oral representations as to past or existing matters of fact and as to future matters. REPRESENTATIONS AS TO FUTURE MATTERS 137 Many of the representations made in the period from early 1991 to late 1993 which the Commission alleges to be misleading or deceptive relate to the respondents' plans for a large scale project, to be developed over a decade. Many of the details were yet to be decided upon and, while the broad general outline of the project remained the same over that three year period, quite major details changed. For example, commencement of Stage 1 varied, according to the representations made through this period, from late 1993 to 1995. The contest between the parties in relation to representations made on behalf of IMB about future matters is, to a considerable extent, not about whether the representations were made, but whether they were reasonably grounded and whether they were adequately qualified by warnings that what was represented might not come to pass. Many of the representations relied on by the Commission are contained in written material distributed by IMB to members of the public. However, the Commission also relied upon evidence from its witnesses that certain oral representations as to future matters were made by IMB representatives which were also said to have been misleading. There are some disputes over just what was said here. 138 The Commission submits that, in so far as the representations described in pars 21 to 29 of the statement of claim were representations as to future matters: (a) there was no reasonable ground for making those representations. In view of the ruling I made that the Commission could not rely upon s 51A the TPA, the Commission has the burden of proof on this issue; further, (b) the representations as to future matters, even if reasonably grounded, were not qualified or not sufficiently qualified, either by statements to the effect that such matters might not occur or by identifying contingencies and events which would or might affect or prevent those matters from occurring, when they should have been so qualified if they were not to be misleading or deceptive. Reference was made to Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40–940 at 50,251 where Lee J said: "A positive unqualified prediction by a corporation may be misleading conduct in trade or commerce if relevant circumstances show the need for some qualification to be attached to that statement or the possibility of its non–fulfilment to be disclosed as a requirement of fair trading. The fact that the corporation believed or had reasonable grounds for belief that the prediction would be fulfilled, would not answer the question as to whether the conduct was misleading or deceptive conduct in trade or commerce. The misleading or deceptive conduct may be found in the failure to qualify the statement or disclose the risk of non–fulfilment and the event of non–fulfilment of a prediction or promise may be evidence that raises an inference that such a risk of non–performance existed or that qualification of the positive statement, prediction or promise was required." The Commission submits that the future representations made by the respondents were not adequately qualified having regard to the nature of the predictions and the audience to which the statements were made. (c) If there was no reasonable prospect of the respondents being able to fund construction of a club and associated facilities of the kind they described, then there would be no reasonable basis for any of the representations as to future matters made by the respondents. That is, I think, a critical issue in this case. 139 In relation to their representations as to future matters, the respondents submit that they believed those statements, that they had reasonable grounds for making them and that they were properly qualified. 140 The Commission dealt with the issue of whether there existed a reasonable basis for the future representations made by the respondents under five headings, subsuming in each the relevant paragraphs of its latest statement of claim: (1) Was there any realistic prospect of the respondents being able to fund construction of a club and associated facilities of the kind described in the representations made by the respondents? (2) Was there any reasonable basis for the representations as to the future membership, ownership, value, profitability and attributes of the club? (3) Was there any reasonable basis for predicting the future value of shares in Logan Lions Limited? (4) Was there any reasonable basis for predictions as to performance of policies? (5) Was there any reasonable basis for predictions as to the dates for commencement and completion of the development? Could the development be funded? 141 The Commission submitted that if this issue is determined against the respondents, it will be unnecessary to determine the remaining questions because it must necessarily follow that there could be no reasonable basis for any of the future representations. 142 The Commission is, I think, correct in submitting that whether the development as represented by the respondents could ever be funded is a fundamental issue in that it pervades most, but not all of the bases on which the Commission alleges that the respondents engaged in misleading conduct by making representations as to future matters. It is an issue raised by par 21 of the latest statement of claim as to whether there were reasonable grounds for the representations as to the future value of the shares in Logan Lions Limited. It is involved also in some of the questions raised in pars 22(b)(iii) and 23(c) about the respondents' expectations for Meakin Park and later, Logan Park (if findings are made that the representations here alleged were in fact made). Whether the project could be funded is central to the issues in par 24 involving commencement and completion of a development of the kind referred to in pars 24(b), 27(a) and 28(a). It is of relevance to par 29 alleging a misrepresentation that finance had already been approved. 143 But whether the respondents engaged in misleading conduct within par 25 by what they had to say about the performance of the policies when they lacked reasonable grounds for making such representations cannot, I think, be governed by a finding adverse to the respondents on the issue of whether there was any prospect of being able to finance the scheme. The representations made about policy performance are a discrete issue for the reason that the respondents emphasised: the point they constantly made in their seminar presentations and in much of the written material they distributed was that people who purchased policies were not obliged to make those policies available to the scheme. It was a central theme constantly emphasised by the respondents that, when the time came, in the early phase, for policy owners to take out loans against their National Mutual policies and make the loan moneys available to IMB and, in the second phase, when the time came for policy owners to assign their Legal & General policies to the lender selected by IMB, they were entirely free to refuse to do that. This message was effectively conveyed to the mass of people to whom IMB marketed its scheme. It is a point constantly made by the witnesses. The representations as to the future value of shares stand in a different position. The respondents could still engage in misleading conduct by making representations as to the future value of the shares, even though they conveyed to people to whom they were marketing the scheme the fact that no one could predict with any degree of reliability the value of the shares ten years' hence, if there was never (or never from a particular point of time) any real prospect of the respondents being able to finance the scheme and so no prospect of them being able to bring it to the stage where shares of the kind spoken about by the respondents would become available: see Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40–940. 144 The respondents rejected the Commission's formulation of the issue as to whether there was any realistic prospect of funding being available and submitted that it should more correctly be formulated as: "Did the Respondents have any reasonable grounds to believe that they would be able to fund construction of the club and associated facilities of the kind described in the representations made by the Respondents". 145 That is correct, I think, so far as it goes. But it must be kept in mind, particularly given the change made in mid 1992 to the respondents' proposals for funding the development, that this question is to be answered not by evaluating whether the respondents had reasonable grounds to believe at any one particular time, such as at the outset in early 1991, that they would be able to fund construction of the development. It is necessary to consider the grounds they had for believing that they would be able to fund construction at the various times they made the representations complained of by the Commission in this action over the period from early 1991 to late 1993. 146 There can be little doubt that the considerations which the Ivers identified when they first formulated their proposal – the demographic profile of Logan City, the imminent development of a national rugby league competition and the imminent introduction into Queensland of poker machines – show that it was reasonable in 1991 to believe (as the respondents say they did believe) that an opportunity then existed for the development of a major rugby league club in Logan City. The Commission's expert, Mr McDougall, a director in the Corporate Finance Division of KPMG, acknowledged as much. The history of the Greenbank RSL Club between 1992 and 1999 eloquently demonstrates that. 147 The respondents pointed to the "remarkable growth of the Greenbank RSL since 1993" as providing significant evidence to show that their belief in the viability of the Logan Lions proposal was well founded. The evidence of Mr Limbrick, General Manager of the Greenbank RSL since late 1992, shows that in 1992, when Greenbank RSL first obtained gaming machines, it had eight staff members, ten machines and 400 members and was operating out of a failed restaurant that it purchased with bank finance for $850,000 that year. By mid 1993, there were 3,000 members and the club embarked on a $1,300,000 expansion. By June 1994, membership was in excess of 6,000 and there were fifty poker machines. By the latter half of 1995, the club had 12,000 members and eighty–nine poker machines. In March 1996, a new $10,000,000 extension was commenced and by the time it opened in December 1996, membership numbers had reached 18,000. By May 1997, the club had 240 poker machines and in excess of 30,000 members. In 1998, the club opened a new $5,000,000 extension and membership reached 62,000. In late 1999, the Greenbank RSL was valued at $26,000,000 and carried $11,500,000 in debt. It had obtained 100 percent finance from the National Australia Bank in 1993 for expansion of the club facilities. Limbrick considered that community support for the club was a factor in its success. Other Brisbane area clubs which increased their poker machine numbers from early 1990s also experienced considerable growth. 148 But such evidence does not go beyond showing that it was reasonable, when the Ivers first formulated their ideas for a rugby league club development in Logan City in early 1991, for them to think that a properly designed and implemented development might be established. The question whether the respondents infringed s 52 the TPA by making the various predictive representations relied on by the Commission has to be resolved taking into account the way the respondents' proposals for the development of their scheme changed between early 1991 and late 1993 and, in particular, how their plans for funding the scheme changed in mid 1992. 149 The respondents' initial idea for funding this development was that the $125,000,000 then thought to be required to construct the development in three stages over a ten year period could be raised by selling 5,000 investment policies of the kind offered by National Mutual. 150 The respondents sought legal advice from McCullough Robertson, a prominent law firm, at a fairly early stage of the project, prior to commencement of marketing of the syndicate. The respondents say that the original syndicate funding concept was developed in conjunction with McCullough Robertson, and is described in their letter to IMB dated 23 May 1991, in which they give their advice in accordance with the Ivers' instructions, "on the appropriate vehicle to be adopted by the proposed 2001 Football Syndicate". The letter describes five stages of the proposed project before considering the various alternative structures which could be adopted by the syndicate: "1. … (a) Stage 1 – The IMB Group Pty Ltd sells 5,000 Lifestyle Protection Investment Only Policies which will mature in ten (10) years time. These policies will have the facility to borrow against their cash value; (b) Stage 2 – 18 months after the 5,000 policies have been sold, the syndicate vehicle will be formed and a prospectus issued to persons offering, the subscription or purchase, of securities or equity, in the vehicle. We understand 5,000 persons are required for the vehicle to be viable. The policy holders would be given first preference and only a minimal subscription is required at this stage; (c) Stage 3 – Three (3) years after the sale of the 5,000 policies and the requisite subscription to the syndicate vehicle, each member will be required to subscribe a further $2,000.00 in securities or equity. It is anticipated that this sum can be borrowed against the policy's cash value, which at this stage will be $2,917.00. The loan will be repayable at 14% interest only. … (d) Stage 4 – In approximately 1997, the cash value of each policy will be $9,252.00 and each member would be required to subscribe a further $5,000.00 in securities or equity in the syndicate vehicle. Again this sum would be borrowed and geared against the cash value of the policy. This stage would raise a further $25,000,000.00 in capital which would be used towards the construction of the second phase of the concept drawings. (e) Stage 5 – In 2001, the cash value of each policy will be approximately $24,369.00 and again the members would be required to subscribe for further securities or equity in the syndicate vehicle. The funds raised would be used towards the third phase of construction and the culmination of the formal bid for a Football Club to enter the New South Wales Rugby League Competition." 151 The letter further comments on Stage 1: "2. Stage 1 does not require an immediate prospectus because no offer or invitation for the subscription or purchase; to subscribe for or buy, securities of a corporation is being made in accordance with Section 1018 of the Corporations Law … Simply, policies are being sold to interested persons and the entity is not in existence. 3. Until the syndicate vehicle is formalised the policy holders will be governed by a structure similar to a Club, with its own rules of membership and procedure. …" 152 McCullough Robertson did not themselves attempt to assess the practicability of IMB selling 5,000 policies in sufficient time for each to have the cash values they adopted from the National Mutual model: they just accepted what the Ivers (who had experience as insurance agents) told them in this regard. 153 The cash values of these 5,000 policies three, seven and ten years after they have been sold, stated with such precision in pars 1(b), (d) and (e) of the McCullough Robertson letter, are the estimates contained in a model prepared by National Mutual for the Ivers in connection with the scheme. This model shows National Mutual's estimates of the cash value of the policy of the kind sold by the respondents through 1991 at the end of each year of its twenty year life. National Mutual based this model on a number of assumptions and there is a note to the National Mutual document: "These figures represent illustrations only; future values cannot be guaranted." The key assumption was the rate of investment return that the model assumes would be achieved year by year. The evidence shows that this assumed rate of return, though not stated in the National Mutual document, would have been one of the then current indicative investment rates of return approved by the Insurance Commissioner for use by insurance offices in marketing their products. 154 The respondents state that "[b]ased upon this legal advice, we believed that we had a simple, secure, and most importantly, a legal way for a multi–million dollar development to ultimately be funded by ordinary members of the community". It was a variant of this outline that the respondents described in the promotional material they distributed from mid 1991. 155 The scheme originally proposed by the respondents is set out in their "2001 Rugby League Syndicate" document produced about mid 1991. [Ex C8 tab 3] It reflects the outline in the McCullough Robertson letter. It envisaged the construction of Stage 1 (a large concert auditorium with bars, restaurant, etc) by 1994. The $10,000,000 needed was to come from loans of $2,000 to be taken out in 1994 by each of the 5,000 to whom policies had by then been sold. Stage 2 (consisting of extensions to Stage 1 and the construction of a very large open air amphitheatre) was to be built by 1997 at a cost of $25,000,000; this amount was to be raised by each of the 5,000 policyholders taking out a further loan of $5,000 against their policies. Stage 3 (a football stadium/leagues club and an international hotel/country club) was to be built by 2001 at a total cost of $90,000,000. This amount was to be raised by each of the 5,000 policyholders taking out a third loan in 2001, this time for $18,000 against their policies. 156 In their later brochure of 22 July 1991, the respondents outlined how they proposed to fund the development with policy loan moneys in a little more detail. As the Commission's actuary Wood points out, the cash values of the policies adopted by the respondents in the 22 July 1991 document for the policies in 1994, 1997 and 2001 are based on the estimates of cash value in the model prepared by National Mutual for the respondents in connection with the scheme. It assumes (in the first years) monthly premiums of $102 with premiums indexed at 8 percent per annum compound. The IMB document of 22 July 1991 describes a "contribution $25.00 per week indexed at 8% per annum". Both National Mutual and Legal & General were prepared to lend to the policy owner up to 90 percent of the cash value of the policy at the time of the loan, subject to the policy having been in force for at least two years. The amounts of the loan backs in 1994 and 1997 indicated in this IMB document of 22 July 1991 are both within the 90 percent figure. 157 This proposal, relied on by the respondents through 1991 and into 1992, envisages that 5,000 policies would have all been sold sufficiently far ahead of construction of the first stage some time in 1994 to have all acquired a loan value of $2,000. That, of course, involves making assumptions as to the investment performance of the insurers who issued the policies, a separate matter of contention in the litigation. Though loans to 90 percent of the current cash value of a policy were commonly offered by insurers, including National Mutual and Legal & General, the evidence is that policies of the kind in question would have to be in force for two years before there would be any prospect of them acquiring a $2,000 loan value. More importantly, the evidence is also that they would, in any event, have to be in force for at least two years before insurers like National Mutual and Legal & General would be prepared to make any loans at all against a policy. The need for the insurer to cover the commissions payable to the selling agent out of the first two years' premiums explains in part the reason for this. Documentation issued by National Mutual to the purchaser of a policy of the kind sold by the respondents to the end of 1991 contains the following statements: "This is a long term policy which is designed to continue until the proceeds are payable. Your Policy does not acquire a cash value until two years' premiums have been paid and the Plan has been operating for two years. … Loans are available against the value of the policy once the policy has a cash value available and at least two years' premiums have been paid." 158 Policies sold by IMB early in 1991 might, depending upon investment returns achieved by the insurer, have loan values significantly greater than $2,000 by late 1994, if that was when construction of Stage 1 was to commence. But no loan funds could be raised by IMB from any policies sold after late 1992 to provide construction funding two years after, in late 1994. It may not have been necessary to sell the entire 5,000 policies by late 1992 to generate the $10,000,000 funding necessary for late 1994 Stage 1 construction, if enough were sold at an early stage and National Mutual's investment performance were good enough. But the respondents made no attempt to develop a model of the sales performance they might need to achieve to have any ground for thinking that the pool of policies they needed to sell by late 1992 would provide sufficient loan funds to pay for Stage 1 construction, if that were to be completed or at least commenced by late 1994. All they did was make and then persist for a time in the simple assumption that they would sell 5,000 policies before late 1992 and that each would, two years later, produce loan funds of $2,000 to fund construction of Stage 1, initially envisaged for sometime in 1994. The respondents persisted with this simple funding model into 1992. 159 In late 1991, National Mutual commissioned Coopers & Lybrand to report on the financial aspects of the "2001 Rugby League Syndicate" document being promoted by IMB. The respondents put this report into evidence through Mr Mike Cutlack, former Agency Manager for National Mutual in Queensland. The investigation conducted by Mr Robb of Coopers & Lybrand included meeting with the respondents, Glenn and David Ivers, Backo and McLean. Robb did not carry out any work to substantiate financial and other statements made during this meeting. He identified "the critical issues to the success of the Syndicate" as the final feasibility study by IFC (which was produced two months later) and "the sale of 5,000 LPIO policies". He observed: "The success of the Syndicate is critically dependent on the sale of, by current calculations, 5,000 LPIO policies … [F]rom the demonstrated sales seminar (presented at our meeting with the IMB Group including flip charts and related material), it is quite clear that the LPIO policy is used solely as a savings mechanism, the objective of which is to provide syndicate members with sufficient funds at the critical dates of four, seven and ten years hence, to meet their application monies to the public company." 160 National Mutual commissioned this and other investigations to determine whether it itself had any legal exposure as a result of IMB's activities in selling its policies. Cutlack said: "Prior to authorising the agency National Mutual's due diligence procedures were invoked. … In view of the unique concept of the IMB Group I informed the State General Manager of the IMB's intended approach to marketing the company's product. In order to ensure all aspects of IMB's operation complied with company procedures and Federal Government legislation, comprehensive due diligence was undertaken. This included opinions from the company's State Legal Officer and an independent chartered accountant. All parties were satisfied with the IMB concept. The Divisional and Regional Agency Managers were instructed to assist the IMB Group and its staff and agents to maintain the company's performance standards." 161 Neither National Mutual nor its consultant, Coopers & Lybrand, made any attempt to assess the practicability of IMB selling either 5,000 policies or a lesser number of policies sufficient to generate $10,000,000 in loan funds by late 1994, when IMB's initial development model envisaged that Stage 1 would be constructed with that loan funding. 162 The IFC feasibility study produced in final form in January 1992 made no attempt to assess the practicability of selling so many policies: it simply made the assumption required by its instructions to assume that the sales would be made in sufficient time to generate the necessary construction funding. The IFC study did make in Section 4.0, "Membership and Usage Projections", a detailed assessment of the likely membership that IMB could expect its club development to have in each of years one to five of the club's operations. On the basis of its evaluation of the likely catchment area for a Logan City–based club, the demographic make–up of that area and the history of a number of sporting and other clubs in New South Wales, the Australian Capital Territory and Queensland, the IFC study concluded, in relation to the level of membership that could be expected for the IMB club development in the first year of operations: "For the purposes of this feasibility, it is assumed that there will be 5,000 active members at opening. A higher membership level has not been assumed as: - it is possible that members may pay $20 to join and not make use of the facilities, so that their contribution to the usage level is negligible; - the NSW club concept is new in Queensland and there will be come [sic] uncertainty as to the opportunities it will provide; and - the 5,000 local membership level has, according to our research, only been achieved in the Brisbane area by one or two other clubs to date. It is recognised that the syndicate is targeting 5,000 syndicate members. The size and nature of the catchment area is also recognised as a very positive feature. However, it would seem at this point to be unrealistic to assume more than 5,000 active members using the facilities according to NSW state averages." 163 But IFC's estimates, that in year 1 of the proposed club operations it could expect a membership of 5,000, did not touch at all upon the question whether it would be practicable for IMB to sell 5,000 insurance policies to create the funding base necessary to enable that club to be developed and opened. IFC made no attempt to test the practicability of achieving policy sales of that order. It simply acted in this regard on the assumption of the respondents that this sales figure could be achieved. That was not part of IFC's brief. That is clear from the opening words of Section 7.0, "Financial Assessment", of the IFC study: "The purpose of this financial analysis is to assess the economic performance of the club in terms of the net operating income generated before fixed charges of any interest, depreciation, refurbishment reserves etc, and taxation, if any, over the initial 5 year period. It also assumes that no major capital work is completed during the review period. … It is anticipated that the Club would take 12 – 18 months to build, and therefore, would be ready to commence operations from January 1, 1994." 164 No one, none of the respondents, none of McCullough Robertson, National Mutual or IFC (in the feasibility study it produced for the respondents in January 1992), made any attempt to assess the practicability of selling so many policies by late 1992. 165 This goes a long way to establishing that the respondents, during the period from early 1991 to mid 1992, had no reasonable grounds to believe they would be able to fund construction of the project they were marketing. 166 Whether such an arrangement, if implemented, could have been the source of the funding required for the proposed development is one question. But it is clear from the respondents' experience that the notion of selling 5,000 policies in the relatively short time frame envisaged by the respondents of about eighteen months from mid 1991 to late 1992 was impracticable. The respondents never came near to selling 5,000 policies. By the end of 1991, they had only sold about 450. Cowley joined the IMB organisation in mid 1992. He appears to have been instrumental in building up a much more effective sales structure within IMB than the Ivers and their associates had been able to achieve, though some were experienced insurance agents. But, by the end of the second year, November 1992, only a total of about 1,200 policies had been sold. By near the end of the third year, that number had risen only to about 3,200, although IMB had, for some time, been running a very large and sophisticated sales operation involving, among other things, the presentation of numerous, well–organised sales seminars each week attracting up to 100 people each. There is such a disparity between the envisaged sales of 5,000 policies and IMB's actual sales performance as to justify the conclusion that the respondents' original notion of the funding construction, by selling between early 1991 and late 1992 at the latest 5,000 policies which would accumulate an aggregate loan value of $10,000,000 by the latter part of 1994 at the latest, was never realistic. This shows that the simple assumption they made that they could sell 5,000 policies in about eighteen months was not a reasonable basis for them to believe they could fund the project as they represented through 1991 into 1992. 167 It was the realisation by about mid 1992 that the respondents were never going to be able to sell the number of policies they had been counting on as sufficient to fund Stage 1 of the project in the time frame within which work had to start if the scheme was to have any prospect of becoming a reality, that caused the respondents to abandon their original idea for funding the project from policy loans. In mid 1992, they instead decided to seek external loan finance to fund each stage of the project with the assignment of such policies as they had been able to sell to the lender being offered as security (together with such security as could be arranged over the constructed and operating project). 168 From about mid 1992, the respondents began to distribute the "Logan Lions Rugby League Club – A Very Rewarding Investment in Our Community's Future" document. According to the respondents, this was prepared to reflect the change in direction the respondents had determined upon for the funding of the scheme. Unlike the documents produced by the respondents as aids to marketing the scheme in the first eighteen month period when policy loans were to be the source of project funding, this document gives little information about the timing and the funding of the development. It contains only the following statements on these matters: "The first phase is a planned magnificent four storey club facility at Meakin Park. … A privately owned rugby league team, the Logan Lions … will be the main feature of your investment along with future plans for a holiday resort network and country club for members." and: "The first stage of development is the construction of a sports and entertainment club to initially cater for up to 15,000 members. … Further stages will progressively increase the capacity to 100,000 members." 169 How the project is to be funded is mentioned only in these statements: "It is intended a public company will undertake the developments and I.M.B. Group policy–holders will be given the opportunity to subscribe to shares in the company." and: "The club facilities will be largely owned outright by your company on Logan City land, subject to a 99 year lease." 170 The IMB business plan submitted to Logan City Council on 1 October 1992 describes a significantly less elaborate project than the $125,000,000 complex earlier envisaged. It states: "The funds required: Initially the company is seeking to raise in the order of AUD$ 15,000,000 after costs to construct stage one, with a further AUD$ 35 million to complete the total development by the turn of the century, coinciding with the acceptance of the Logan Lions bid." 171 In the section headed "Development Capital Breakdown", it contains the following statements by way of "Early estimates Meakin Park only": "1. Scorpions ground and facilities upgrade engineering works to flood prone creek areas etc, plus Stage one of sports club to 15,000 members 180 poker machines. AUD $ 15 million 2. Stage two club facilities with development to 100,000 members with 750 poker machines, also basketball stadium, hockey fields, practise fields, tennis courts, bowling greens, baseball field, artificial lake with boating, cable waterskiing along with a 40,000 seat amphitheatre. AUD $ 35 million Total Capital AUD $ 50 million" 172 The document also referred to the role of the policies as an aid to funding, stating: "The development company would access these funds [the maturity value of AUD$50,000,000 of 2,000 policies by 2002], by policy holders assigning the proceeds of their individual investment policies, in exchange for an agreed share transfer at par, from the Public company established to develop the Meakin Park complex and Logan Lions Sports Club." 173 It also states that: "The assigned loan value of the policies would provide the capital guarantee for a marketmaker to underwrite." 174 For good or for ill, the respondents left location of the external lender necessary to enable the project to be implemented to Cowley. There is no suggestion that any of the other respondents made any attempt themselves to identify possible lenders. However, it was not until May 1993 that IMB entered into the consultancy agreement with Cowley under which he assumed, as his primary task, the job of securing funding for the project. Though the respondents decided in mid 1992 to change the method of funding from borrowing against the policies bought by participants in the scheme to funding the project with external loan finance, there is nothing in the evidence to suggest that a potential bona fide lender was ever identified before IMB ceased its operations at the end of September 1993. 175 An insight into the absence of effort made by the respondents to locate the external lender central to bringing the scheme to reality as from mid 1992 is provided by the actions of the respondents in authorising the submission to Logan City Council on 1 October 1992 of IMB's business plan. It identified the principal avenue of funding for the development as being Legal & General. It is apparent that this statement was made to the Council in circumstances where the respondents had never even raised with any person in a position of authority in Legal & General the question whether that company might be interested in funding development of the project. When Legal & General learned what the respondents had told the Council about their possible involvement as project funder, they immediately insisted that the respondents stop making any such suggestions since: "this scenario has never been considered or discussed in the past and is unlikely to be in the future". 176 McDougall, a director in the Corporate Finance Division of KPMG, was called by the Commission to give evidence that, in his opinion, the respondents could not have raised $20,000,000 debt funding for the project in July 1993, ie, when the Logan Lions business plan was given to the Council, for the reasons summarised in par 6.1.4 of his report. In cross–examination he made a number of concessions. He said that assignments to a lender of the insurance policies (by those owners prepared to do that, though under no enforceable obligation to do so) and security over the club operations, constructed as they were to be on land held only under a long lease from the Council, would be regarded by a financier for a variety of reasons as a "less than optimum" form of security to support a loan of $20,000,000. But he said a financier might possibly be found who would be prepared to lend against that security to a club with a strong cash flow. He did not resile, however, from his opinion that the respondents would not be likely to have been able to raise $20,000,000 in debt finance in mid 1993 for reasons that included the unreconciled major disparity between the financial projections in the Logan Lions business plan of July 1993 and the much more conservative projections in the feasibility study prepared in late 1991 – early 1992 by the independent consultant, IFC, and the absence of any independent support for Logan Lions in the form of market research suggesting that the project could reasonably achieve the forecasts set out in its optimistic business plan. 177 McDougall also noted, in contrast to IFC's conservative approach, the failure of the respondents to take into account in the July 1993 business plan the legislative restrictions on the number of poker machines that a particular club could operate. IMB relied in its Logan Lions business plan of July 1993 on these machines to generate a large part of the club's projected cash flow. The July 1993 business plan was based on the assumption that machine numbers would start in 1995 at 200 and increase from 200 in 1999 to 600 in 2000. The July 1993 business plan stated: "NB. This intended structure was developed, to conform with Queensland Gaming machine and licensing regulations". Mr John McKnoulty was called by the respondents as a solicitor expert in licensing matters. He said that the respondents had taken no advice from him as to the requirements of the Gaming Machine Act 1991 (Qld) before making the unjustified representations at seminars and in business plans about the club operating with poker machines far in excess of the maximum permissible number. The Ivers only sought his involvement after IMB had ceased trading in September 1993 to obtain a club liquor licence and a club gaming machine licence for premises at Woodridge for a club with which the Ivers apparently became associated, the Logan Lions League of Junior Sports Inc. In mid 1993, the maximum permissible number of machines was 250. This was amended in 1997 to 300. The evidence indicated that, as at late 1999, the respondents would not have had any prospect of obtaining licences for more than 300 poker machines. 178 The Commission also called a chartered accountant, Mr Rodin, who expressed the opinion that the respondents' initial scheme to finance the development through loans against policies was impracticable. He referred in this context to the difficulties in selling a sufficient number of policies to generate the level of development capital required and to the logistical problems associated with the timing of cash flows from loans of such a large number of policyholders to match the project's capital requirements and also with the logistical problems of administering loan backs from 5,000 policyholders. Mr Mills, State Manager of Legal & General throughout the period of IMB's agency, referred in his evidence to IMB's initial concept of raising development funding by way of a series of loans from 5,000 policyholders. He said that he could see no reason why Legal & General itself could not have "easily and promptly attended to" the processing of such a large volume of policy loan applications within one to two weeks. He was here assuming that 5,000 policies had all been sold and had all accumulated sufficient value to enable loans to be raised on each. There is no suggestion that Mills made any attempt to evaluate the possibility of IMB selling 5,000 policies in a particular period. That IMB may have had the capacity to set up a structure to enable it to do all it would have had to do to organise such a volume of policy loans is suggested by its capacity to marshall evidence from 1,340 witnesses. 179 Rodin also referred to the failure of the respondents to take into account lapses in policies dealt with in the report of Wood which he attached to his own. Wood, an actuary, was also called by the Commission. He said that if 5,000 policies were sold but experienced the industry average lapse rate of 11 percent per annum, then only about 1,600 of the original 5,000 policyholders would still hold policies at the end of ten years. Even if the policies produced $25,000 at the end of that period, the 1,600 policies would only provide about $39,000,000 in funds at the end of that period, as opposed to the $125,000,000 funding described in early versions of the scheme. The July 1993 version of the Logan Lions business plan described the project cost as A$120,000,000. If the lapse rate was only 5 percent per annum, the 3,000 policyholders left from the original 5,000 at the end of ten years, on the same assumption would provide only $75,000,000 of funds at the end of ten years, as opposed to the $125,000,000 suggested. The respondents may, however, have done rather better than 5 percent per annum, with their 8 percent overall average lapse rate. 180 Rodin did not think it likely that IMB would be able to obtain public listing at an early stage in the project's operations because of the absence of a track record of consistent profitability if it was planning to raise funds from the public for a $125,000,000 development in what he considered a high risk industry. The Australian Stock Exchange Listing Rules required that a company proposing to float, in effect, have accumulated profits of $500,000 over the three years preceding the float or assets of not less than $5,000,000 at the time of listing. Rodin also doubted whether the float proposed by the respondents would have attracted underwriting support so necessary to success in achieving a high placement. Mr Peter McKnoulty's evidence was that, before Logan Lions Limited could list, the policyholders would have to contribute from their policies. But when they would be called upon to contribute to the company's capital, they would not have any idea what the shares might trade at. It was impracticable for them to sit back and wait for the company to be listed before deciding whether or not to contribute from their policies, as was represented to be the position at the seminars. 181 If the case was to depend upon whether the scheme, as initially devised in early 1991, was practicable, having regard to how development finance was then intended to be raised, the respondents would face a difficult task in showing that they had reasonable grounds for making the predictive representations about development of the project that they did from early in the piece and through most of 1991. The sales performance they were able to achieve through 1991 culminating in a total of about 450 policies by November of that year must have cast increasing doubt on the reliability of the simple, unexplored assumption they made at the outset that they would sell 5,000 policies between early 1991 and about the end of 1992. The concessions made by McDougall, the evidence of Mills to the effect that the logistical problems emphasised by Rodin would not have been a problem for Legal & General and the demonstrated capacity of the respondents themselves to cope with major logistical exercises, as evidenced by their capacity to marshall the large number of witnesses they did, may have assisted the respondents to show that the initial proposal might have been practicable when it was devised in early 1991. But their poor performance through 1991 in failing to achieve policy sales at the level necessary to generate the loan moneys required to realise the project throws serious doubt on whether the respondents had any reasonable basis for thinking they would be able to fund the kind of project the subject of the respondents' representations in most of the period through 1991 to mid 1992. That question ceases, however, to be of significance from, at the latest, mid 1992 when that form of financing the scheme was abandoned. 182 Whether the respondents might have been able to raise $20,000,000 in debt finance in July 1993 (one of the issues to which McDougall's report was directed) is also largely beside the point. Their conduct between adopting that funding plan in mid 1992 and late 1993, when IMB had to shut its business down, shows they made no attempt to locate such a source of funding other than the very belated reliance they placed entirely on Cowley. There is no evidence that they attempted to identify an Australian lender. So far as the evidence reveals, Cowley confined such attempts as he made to identify a lender to seeking one off–shore about mid 1993. The undoubted difficulties that the respondents would have faced if they had actively sought debt finance for the project, described by, eg, McDougall, coupled with their inaction in seeking such finance, demonstrates the absence of any reasonable ground for making the predictive representations they did about a range of matters referred to by the Commission from mid 1992 to late 1993 concerning the development of the project. It is irrelevant, in my opinion, to that issue that, if the respondents had tried, they may have been able to overcome the difficulties inherent in the assets they had to offer a financier by way of security and obtain $20,000,000 of loan funding: they did not make any serious effort to do that. 183 There is no evidence (other than an unclear comment by Deputy Mayor Ayling in cross–examination, but not followed up) that any of the respondents gave any consideration at all to the possibility of resurrecting the idea of funding the project with loans from policyholders, who numbered only about 3,200 by September 1993, at any time after the respondents abandoned that idea in mid 1992, in favour of seeking external loan finance. There is no evidence on the feasibility in late 1993, when various of the respondents began to have serious doubts about Cowley's bona fides and reliability, of funding the project with policy loans at that stage. None of the respondents suggested in evidence the thought ever occurred to any of them. Nor, despite the long period of inaction in attempting to locate an external financier after the decision had been made to follow that course in mid 1992, is there anything in the evidence to suggest that any of the respondents took any action to put in place arrangements to raise funding by a public offer through a prospectus. So far as the evidence reveals, the only action taken after June 1992 to find funding for the project was the action, if it can be called that, by Cowley already referred to. I reject the closing submission of the respondents that they had good reason, in late 1993, to think that they might be able to fund the project by reverting to the original idea of persuading policyholders to take out loans against their policies and pay over the loan moneys to IMB, perhaps in exchange for shares in Logan Lions Limited, a course which would have required the issue of a prospectus, action never undertaken by the respondents. Commencement AND COMPLETION of construction 184 Representations as to the date for commencement of construction changed from initially 1994, to mid then late 1993, to mid 1995. An outline of the various representations made by the respondents about when construction would commence relevant to the allegation in par 24(a) of the Commission's pleading follows. 185 The document headed "2001 Rugby League Syndicate" [Ex C8 tab 3], produced about mid 1991, sets out the proposed development schedule as follows: "STAGE 1 1994: · 5,000 seat concert auditorium plus bars, theatre restaurant, etc. ($10 million) STAGE 2 1997: · Extension to Stage 1. Seating increased to 15,000. All other facilities increased accordingly. · 40,000 – 50,000 seat open air amphitheatre. [$25,000,000 – Ex C8 tab 3, p 81] STAGE 3 2001: · Football Stadium/Leagues Club $50,000,000 · International Hotel/Country Club $40,000,000" 186 The same construction program was repeated in the "2001 Rugby League Syndicate" document of 22 July 1991. 187 The "2001 Rugby League Syndicate" document [Ex C8 tab 2] produced late 1991 – early 1992 states: "It is proposed that Stage 1 of the development will commence in 1994. … The concept put forward is just that, 'a concept'. What is actually developed will be determined by the members themselves at the time." 188 The "Members Information Portfolio" document [Ex C8 tab 15] produced early 1992 states: "The first major issue of shares is anticipated in 1993 and marks the commencement of stage one." (p 4) "STAGE ONE – The first stage of development is proposed to commence in 1993 and will see the construction of a sports and entertainment facility projected to cost 11 million dollars." (p 10) 189 This document, however, contains the following general qualification: "This Portfolio outlines the proposal as formulated by The I.M.B. Group Pty Ltd. The projects finally undertaken by the Company will be governed by decisions to be made by the Company at various stages in the future. The proposals set out in this Portfolio are dynamic. The proposal on the following pages is a projection only at this stage; by its very nature the shape of the development ultimately undertaken must remain flexible to allow for changing conditions and circumstances. There can be no guarantee that the nature of the development will be as indicated in this Portfolio, which should be read in this context." 190 "Lions Roar" of October 1992 [Ex C8 tab 28] makes the following qualified statement about commencement: "Work on the magnificent, multi–million dollar Logan City Sporting Complex planned for the Meakin Park site will get underway in mid–1993, if corporate finance negotiations proceed as planned …" 191 Video with transcript (produced in early 1993 and shown by Backo in Rockhampton and Moranbah in the first half of 1993 and possibly in Brisbane also) [Ex C8 tab 23A] states: "Stage 1 will commence construction this year. [Image – Artist's impression of Club Complex] The club has the potential to house in the vicinity of 800 poker–machines once complete. There will be bars, restaurants, movie theatres, games rooms, a concert auditorium, child–minding, gymnasiums, squash courts, function rooms, an indoor sporting arena capable of hosting tennis, basketball, netball, gymnastics, martial arts, volleyball, badminton, table–tennis – the list goes on. [Image – Artist's impression of Football Stadium] There will of course be the outdoor sporting stadium. This stadium is the intended home base of the Logan Lions in the national competition. Again, this is a multi–use stadium. We will cater for all sports, soccer, baseball, softball, hockey, just a few of the sports played today at a national level. [Image – Artist's impression of man–made lake] We'll have a massive man–made lake with the possibility of a cable water–skiing operation. The lake will have a river stage for major concert events and a natural amphitheatre capable of holding in the vicinity of 40,000 people. [Image – Artist's impression of entire Complex] Overlooking the entire development will be a 200–room hotel offering affordable package deals for members. The entire development will be linked around the clock by a light rail system. I'll stress here folks that this is not a tourist development, it is designed to be affordable for Mum, Dad and the kids: it is a Family Club, and where's it all going to happen? [Image – Aerial View of Meakin Park site] The Meakin Park site covers an area of over 180 acres and is situated in the heart of Logan City. … … A natural progression for a club this big is to build a country club for its members within driving distance. [Image – Footage Wivenhoe Dam and associated activities] The Brisbane Valley provides a perfect location with Wivenhoe Dam offering a vast range of recreational opportunities. The construction of a country club in this region will allow us to draw on a much wider membership base, the entire eastern growth corridor. The membership potential of the Logan Lions together with a country club is almost unlimited. How many do you think we could have? 200,000? 300,000 members? Folks, consider this: Meakin Park is complete, a one hundred million dollar debt free development. A country club, also debt free will be up and running. Our team, the Logan Lions, are about to enter the national competition. … Consider the potential of a network of resorts marketed by a Rugby League team. A main Meakin Park Club, a Country Club, a North Queensland and offshore link, all forming one big club, a virtual Club Med. Our football team will not be marketing a $1.50 stubby of beer, it will be marketing a $70.00 a year family membership to the best sports club in the Southern Hemisphere. [Image – Artist's impression of Complex] The potential is unlimited. As you have seen, Meakin Park the first phase is ready to go. We have had extensive negotiations in relation to possible development sites in three other areas – the Brisbane Valley, North Queensland and offshore in Vanuatu. [Image – Wivenhoe Dam footage] In the Brisbane Valley, we are looking at a massive block with four kilometres of water frontage of Wivenhoe Dam. [Image – Aerial view of Herbert River Mouth incorporating Dungeness] Dungeness, 400 acres on the mouth of the Herbert River is a proposed site for the North Queensland link. [Image – Map of Hinchinbrook Island and Coastline] From the block you look straight out to Hinchinbrook Island and the Great Barrier Reef. [Image – animated Map showing proximity to North Queensland site and Vanuatu Site from Logan] Vanuatu, three hours flying off the Queensland coast is a proposed site for the offshore arm. My family own traditional land on the islands of Epi, Emai and Tongoa islands in Vanuatu. The opportunities are endless." 192 Video of seminar of 8 September 1993 presented by Glenn Ivers [Ex C66]: "The entire development as I said will take about ten years but we plan to open Stage 1 towards the middle of 1995 if everything goes to plan from here on in. Stage 1 is simply this bit down the bottom here. It's a major leagues club facility that will cater for 15,000 members maximum …" (p 13) "That's simply a layout of how we see the Logan Park site. The main thing is that it all fits on there. But you can see, the leagues club actually goes into the main grandstand. There'll be lifts coming up through this dome–area … That stadium will have 3,000 spectator capacity at Stage 1. That's the front of Stage 1 the 15,000 member club, that's what it will look like. That's the dome I was referring to earlier … I should say that the timing for this Stage 1 – we expect to commence construction in the first quarter of next year and from that, with that being the case, we could open the doors somewhere around the third quarter of 1995. That's the time–frame for this to open." (pp 16 – 17) "Now that's Stage 1 folks, that will be constructed at a cost of $20 million and from there, a further $100 million will go into expansions over the next decade. But as I said, that's Stage 1." (p 18) "When that club opens in 1995, to actually come and join the club will cost $26.00 a year … But as I said at the start folks, everyone will go away tonight with something and just by way of saying thanks for coming along and having a look, that's what you receive, that first year's membership. So this letter, I'll give you that. … … Now, when the club doors open, then all you need to do with that letter is hang onto it now because if you lose it, we'd have no way of knowing if we gave it to you. But stick it in a safe place and when the club opens in '95, then you simply take that to the secretary–manager of the club and you will receive the first year's family membership free." (pp 19 – 20) 193 After discussing at some length the proposal to float Logan Lions Limited on the Stock Market as the public company that will build the club facility and how Legal & General policies provide the means of enabling people interested in taking up shares in ten years' time, when the company is floated, to save the $25,000 that would then be required and after discussing the possible value of those shares in ten years' time, Glenn Ivers who earlier said: "What you'll see is a lot more than a rugby league team, it's about a multi–million dollar leagues club development for Logan and for South–east Queensland. … We've been putting it together now for nearly three years … but in that three years, we've spent now just on $2.3 million getting the project from what was an idea back then to what now is a product that's ready to launch." (p 3) continues: "These families are simply saving some money each week or each month in capital guaranteed account with Legal & General in their own name, that's the most important point. Families that are doing it are the only families who ever have access to those funds. … … [S]o if they choose not to at that time, then what they can do is simply take the money out of that account …" (p 26) "What we have here is simply a way for families that might not have $25,000 to preserve the position and basically get on board. But as I said, preserve that position with no obligation, so if it never happens, no one loses any money. If it does happen, according to plan, then there's an opportunity for these families to make some real money." (pp 27 – 28) 194 In the context of a lengthy presentation with the transcript extending over twenty–eight pages, the statement at p 13 of this 8 September 1993 presentation: "[I]f everything goes to plan from here on in" and the statement at pp 27 – 28: "If it does happen, according to plan, then there's an opportunity …" cannot be regarded as effective qualifications to the other statements about construction commencing in 1995 with Stage 1 opening later that year. 195 All the above statements contained in documents distributed by IMB and in transcripted videos shown by IMB at sales seminars were made to members of the public to whom IMB sought to sell policies. 196 Save where indicated, the statements about commencement of construction and opening of the club are all unqualified in the sense that these statements are not accompanied by other statements identifying the possibility that the predicted commencement may not happen either at the times represented or, more importantly, at all. Value and attributes 197 The Commission alleges that representations were made about the value and the attributes of the completed development in pars 24(b) to 27(a) and 28(a) of its pleading. 198 The cost of the entire development was variously represented to be A$100,000,000; A$125,000,000; A$50,000,000; A$120,000,000 and US$120,000,000 (the business plan submitted to the Council in November 1993 describes the total project cost as US$120,000,000). 199 Some representations about the value of the completed development and the attributes that each stage and ultimately the entire development would have are set out in the preceding section of these reasons under the heading "Commencement and Completion of Construction" in the summaries of Ex C8 tab 3, tab 15, tab 23A and Ex C66. Some further representations about these matters follow. 200 The transcript of the Cowley seminar of March 1993 states: "What's going to happen across on Meakin Park is initially: Stage one, a planned 15,000 member capacity Leagues Club, Rugby League stadium etc expanding out between '95 and '98 to a 50,000 member club and later, in between then and 2003 into a 100,000 member club." [Image – Artist's impression of Club complex] "What you see here, ladies and gentlemen is not just a pretty picture. $100 million will be spent between 1993 and 1998 to construct this magnificent theme complex and sports facility. What you have here is a club, a community centre and a football stadium. But we're not just talking about Rugby League, we're talking about all sports." 201 In this seminar, Cowley repeatedly draws the attention of those in attendance to the fact that nothing has been finally put in place to permit the scheme to progress, that there was nothing certain about the value of the shares in the proposed company when it floated in the future, but he repeatedly makes the point that by buying a policy, people do not take any risks of losing any money. 202 In the seminar presentation of 8 September 1993 already referred to, Glenn Ivers gives these details of the completed development: "We're talking about $120 million development, $120 million in today's dollars." "We're building a club that can cater eventually for 100,000 members." "… when the doors of that open, they'll be wired with provision for 960 poker–machines: We'll probably only open up with about 200 operational but it's ready to go to 960." "Stage 2 of that leagues club is designed to cater for 50,000 members and Stage 3, 100,000 members towards the turn of the century." "The Stadium obviously is a focal point, that's part of Stage 3. It's a 9–storey facility, once it's complete with its capacity to seat under cover around about 80,000 people …" "On the site also, there's a 200 room hotel, a 3 star hotel facility." "… but that's actually an indoor sports stadium, that's for things like, hopefully national basketball league one day; tennis tournaments, Torville and Dean ice–skating spectaculars, gymnastics, aerobics, martial arts. All sports that can be played indoors will be accommodated for here …" "But you can see, the leagues club actually goes into the main grandstand. There'll be lifts coming up through this dome–area … straight across into the main grandstand so life members will simply be able to walk into the club, go and watch the game and then walk back to the club and once it's completed, that'll run the whole length of the main stand." "That stadium will have 3,000 spectator capacity at Stage 1." "So by walking through there, up the escalators and the lifts, the life members will simply walk straight across what will eventually be the main stadium and life members' stand." "In the first area, there's 480 poker machines on this floor. As I said, 960 in total … eventually there'll be 960 machines in that area." "This is a garden atrium that I've talked about that goes up to the dome with the elevators and the lifts. There's a shop here above the bar area, smorgasbord restaurant like Sizzlers, very affordable meals. There's a movie–theatre … that movie theatre is totally free seven days a week, over and over again, totally free to members of the club." "There's a concert auditorium. That's for the indoor entertainment. Going through the main bar and another bar over … no shortage of bars – lounge–bar, bottle–shop, T.A.B. and a retail shop, that's your sporting equipment shop, cricket bats or your Broncos jerseys, Lions blazer or whatever." "And heading upstairs, provision for another 480 machines. Bistro bar if you want to spend a few more dollars from downstairs. The centre of the auditorium goes through the whole facility so you can just see the seating in there. Child minding facility …" 203 The respondents accepted in their closing submissions that the IMB proposed development was such that representations they made in connection with marketing the proposal did need to be qualified and they also accepted that it was appropriate in the circumstances that the possibility of non–fulfilment should also be disclosed. The respondents submitted that "it was a consistent business practice of the IMB presentation to fully and properly qualify statements made with respect to future matters" and that "all representations were properly qualified, that the possibility of non–fulfilment was always stated". 204 It is true that in some, but not all of the promotional material distributed by IMB, qualifications were stated to the effect that the project might not proceed as planned and it is true that, in some seminar presentations, similar qualifications, ranging in the degree of their explicitness, were also made. 205 But whatever may have been the prospects at the outset in early 1991 of funding the scheme as originally envisaged by raising $125,000,000 over ten years to 2001 from loans against 5,000 policies sold in sufficient time to enable the first stage of the three stages of planned development to be undertaken in 1994 at a cost of $10,000,000, as explained above, it should quickly have become apparent that the respondents' original plan to fund development from the rapid sale of 5,000 policies was not going to succeed. They did nothing to implement their revised plan, adopted in mid 1992, to fund development with borrowed moneys, other than to very belatedly engage Cowley in mid 1993 to find a lender. There is an absence of evidence of any effort on his part to identify a bona fide lender. The respondents never had any reasonable ground for thinking that funding might be able to be arranged to enable construction of Stage 1 to commence in 1993 or 1994 or at any time thereafter or to enable the grandiose project they spoke about in their efforts to sell policies ever to be brought to fruition. The representations the respondents made about construction commencing referred to in par 24(a) of the Commission's pleading and the representations about expending between $100,000,000 and $125,000,000 on the completed project referred to in pars 27 and 28 and the representations about the project having on completion the features or attributes as alleged in par 24(b) were made without any reasonable foundation. 206 In my opinion, from mid 1992 at the latest, though the respondents may for a time thereafter have hoped that they would be able to raise the funding necessary to bring the project into existence, they could never have had any belief that the necessary funding would be able to be raised. This, I think, is apparent from the fact that, though it was in mid 1992 that the respondents abandoned the original funding plan in favour of seeking an external lender, they took no action at all for a year that was directed to doing that. Then, all they did in mid 1993 was commission Cowley to find a source of funding. They left that entirely to him and there is nothing in the evidence to suggest that from mid 1993 to late September 1993, when various of the respondents began to have suspicions about Cowley's bona fides, he did anything to entitle the respondents to think that there was a likelihood or even a possibility of the necessary funding being located. Since, for the reasons given, I do not think the respondents had any actual belief (as opposed to a mere hope) that funding might be able to be obtained from mid 1992, it is no answer to the allegations of the Commission here under consideration that, in various ways and with varying degrees of explicitness, the respondents qualified some of the representations made about commencement of construction and the attributes of the completed project by indicating that the project might not, in fact, proceed. In order to avoid a finding that, by making the representations they did, qualified though they sometimes were about commencement of construction and the attributes and worth of the completed project, they contravened s 52, it was necessary for the respondents to expose to those to whom they made the representations from mid 1992 on that they had been unable to identify any lender who might be prepared to finance the project. The problem for the respondents here is not that they may have qualified the representations now in question, but that they failed to disclose the true extent of the risk of the representations not being fulfilled for want of any reason to think that the necessary funding could be obtained. PERFORMANCE OF THE POLICIES 207 The Commission alleges in pars 25 and 26 of its pleading that the respondents made various representations as to how both the National Mutual and the Legal & General policies would perform in accumulating value for the policyholders over time: "25. In the period from in or about March 1991 to in or about December 1991, represented to the effect that: (a) a National Mutual 'Lifestyle Protection Plan' on the terms promoted by the first respondent, would accumulate sufficient money over a period of ten years to enable a policyholder to acquire 25000 $1.00 shares in a company (later the third respondent); (b) the 'National Mutual Lifestyle Protection Plan' was exactly like a bank account; (c) a loan back facility attached to the 'National Mutual Lifestyle Protection Plan' would allow policyholders to borrow $2000 in 1994, $5000 in 1997 and a further $18000 in 2001; (d) impliedly, reasonable grounds existed for the predictions as to the performance of the 'National Mutual Lifestyle Protection Plan' referred to in (a) and (c). … 26. In the period from in or about January 1992 to in or about September 1993, on the occasions particularised below, represented to the effect that: (a) a Legal & General 'Umbrella Financial Plan' on the terms promoted by the first respondent would accumulate sufficient money over a period of ten years to enable a policyholder to acquire 25000 $1.00 shares in the third respondent; (b) the 'Umbrella Financial Plan' was exactly like a bank account; (c) impliedly, reasonable grounds existed for the predictions as to the performance of the 'Umbrella Financial Plan' referred to in (a)." 208 The Commission here particularised certain documentary material and statements of a number of its witnesses. This was done on the basis that an examination of this mass of evidence would reveal that representations of the kind pleaded were made. The Commission did not, however, rely in its closing submissions on all the material referred to in its particulars. 209 The Commission argues that these representations contravened s 52: firstly, because the respondents had no reasonable grounds for making any of the representations in the particularised material as to what the future value of the policies would be at different times over the ten years following the making of the particular representation because the future value of investment policies of the kind here in question depends upon so many variables that it is impossible to make any prediction about the value of such a policy at any time in the future. Secondly, and inconsistently with this first ground, the Commission says representations that the policies would be worth $25,000 at the end of ten years were misleading in so far as they overstated the ten year values provided by National Mutual and Legal & General in the policy illustration estimates those insurers made and gave to IMB. For example, the National Mutual document showed a ten year cash value of $24,369, on the various assumptions made by National Mutual in calculating that figure, compared with the $25,000 figure after ten years referred to by IMB. 210 The respondents dispute that they made the representations about policy performance in every one of the circumstances referred to in the material identified by the Commission in its "particulars" of pars 25 and 26 of its pleading. But both in written material distributed to members of the public to induce them to buy policies and in statements made by IMB representatives at sales seminars, representations were made in the period March to December 1991 that, by investing $25.00 per week in a National Mutual policy over ten years, the policyholder would accumulate sufficient money to acquire 25,000 shares at $1 in the company that became the third respondent. That is, representations were made that in ten years the policy would be worth $25,000, and also that, in effect, the policy would accumulate sufficient value to enable policyholders to borrow through the loan back facility attached to the policy $2,000 in 1994, $5,000 in 1997 and a further $18,000 in 2001. Similar representations were also made, in a variety of circumstances, in relation to the Legal & General policies during the period from about January 1992 to September 1993, when IMB was marketing them. 211 An early example of the representations made about policy performance are those contained in the promotional video [Ex C3] which IMB handed out to members of the public. The transcript of this video contains the following statements: "The 2001 Rugby League Syndicate is structured to give 5,000 unit holders outright ownership of $125M debt free business over a 10 year period. … [Image – Flow Chart] Ownership of 1 unit buys you 25,000 $1.00 shares over this 10 years. … [Image – Shareholders' Bucket of Money] The vehicle for accumulating capital is a National Mutual Pure Investment Account in the name of the unit holder. A loan back facility attached to this policy allows you access to $2,000 in 1994, $5,000 in 1997 and a further $18,000 in the year 2001 which guarantees you the money to purchase shares in the three stages of development. At all times the cash value of your account is higher than the loan amount, giving you outright ownership of your shareholding in the 2001 Rugby League Syndicate. [Image – Bucket of Money and Artist's impression of Logan Lions complex in the 2001 Rugby League Syndicate] Ownership of this account as well as 25,000 ground level shares in the 2001 Rugby League Syndicate and the yearly dividend which flows from these shares represents the end result of your $25.00 a week commitment. [Image – Artist's impression of Logan Lions Complex] The end result of the 2001 Rugby League Syndicate's involvement in the development of rugby league in Logan City will be a magnificent $125M sporting and entertainment extravaganza totally debt free and owned outright by the 5,000 shareholders." 212 Nothing is said in this video presentation to qualify the statements made to the effect that by paying $25 a week, a policy owner will have the $25,000 necessary to buy the 25,000 $1 shares in ten years' time or the statement to the effect that the loan back facility allows a policyholder access to $2,000 in 1994, $5,000 in 1997 and a further $18,000 in 2001. 213 Glenn Ivers gave this evidence in relation to these statements in the video: "Now, I suggest to you that in September 1991 you knew that the National Mutual policy would not produce that money within 10 years as represented there?–––That's correct. But nonetheless you distributed these videos in September 1991?–––Yes, and anyone who took that video and made a decision that they wanted to have a look at a sales presentation was handed a National Mutual cash value print–out to clarify exactly the situation with that – with the cash values of the policy. As I said, the video was not used totally in isolation; it was used in conjunction with personal representations made by sales people to explain the position." 214 The "National Mutual cash value print–out" he referred to is the document in evidence entitled "Investment only premier lifestyle protection plan. (LPIO20)" produced by National Mutual for IMB early in 1991. I accept that this National Mutual sheet was widely distributed by IMB and that it was distributed with this particular video in September 1991: the Commission's witness, Mrs Matlick, was one of the people given a copy of this sheet in late June/early July 1991. Glenn Ivers also said the video was used in conjunction with personal representations made by sales people to explain the position. I see no reason to doubt this. 215 This National Mutual document shows the cash value of such a policy at the end of each year of the twenty year life of the policy, together with other information. The cash value figures applicable to 1994 and 1997 could be thought to comfortably allow the policyholder to borrow $2,000 and a further $5,000 against such a policy in each of those years. The figure applicable to 2001 is $24,369 in contrast to the $25,000 (which includes the $18,000 final instalment) referred to in the video. The National Mutual document contains the note: "These figures represent illustrations only, future values cannot be guaranted". Matlick took out a National Mutual policy in late June/early July 1991. She acknowledged that she saw this note on the National Mutual forecast sheet. But, notwithstanding this note, I think presentation to members of the public to whom IMB gave the video of this National Mutual sheet, without comment, would be likely to reinforce the statements in the video about the policy being able to generate the three instalments totalling $25,000 over ten years to enable purchase then of 25,000 $1 shares in the project. 216 If nothing more appeared in the evidence, there would be substance in the Commission's contention that, by distributing this video, even if it was accompanied by the National Mutual cash value sheet, the respondents thereby made representations that a National Mutual policy of the kind being offered would accumulate sufficient value to support three loans over a ten year period totalling $25,000. If nothing more appeared, I do not think the statements about policy performance made in this video could be brushed aside as taking on the same colour as the numerous optimistic statements about the future of the project also made in the video so that they should be seen as mere puffery, likely to be understood as such by viewers of the video and thus not amounting to misleading conduct in contravention of s 52. 217 But the respondents put on a mass of testimony designed to establish that IMB so presented the policies as vehicles for accumulating the moneys necessary to purchase shares in the planned float as to leave people with the clear understanding that the suggested policy values were indicative only and could not be guaranteed because actual values depended upon a range of market influences. Before turning to that evidence, I should deal with the other material relied on by the Commission to make out its case. 218 The Commission's witness, Mrs Jones, said that, in the course of a meeting at her home with an IMB representative Mr Coe in May or June of 1991, he gave her a copy of Ex C8 tab 3 entitled "2001 Rugby League Syndicate". This document makes, in tabular form, the same statement as that in the video [Ex C3] about a National Mutual policy accumulating value sufficient to support three loans totalling $25,000 over ten years to 2001. But immediately following this table, in the same size print as the rest of the document, the following appears: "It should be noted that the above figures are not guaranteed, they are estimates only based on particular earning rates which such rates may or may not be maintained and depend of course upon future investment experience." 219 Mrs Jones agreed that Coe mentioned something to the same effect to her orally. I do not consider distribution of this document with this qualification, orally reinforced, was misleading. 220 Exhibits C8 tab 4 was first produced, according to Glenn Ivers, in about August 1991 and tab 5 is dated 22 July 1991. They were both used as marketing aids by IMB in mid to late 1991. Both contain unqualified statements about the National Mutual policy accumulating sufficient value to support three loans totalling $25,000 over a ten year period substantially identical with statements made in the video, Ex C3. 221 Exhibit C8 tab 4 was distributed by IMB to members of the public in late 1991. The Commission witness Mr Hansen received a copy. It is designed to interest people in seeking an appointment with an IMB representative for "a full business presentation" explaining the IMB scheme. Glenn Ivers agreed that this document was intended just to whet the interest of people; he said that, if they took up the offer of a full business presentation, they were then told the true position that policy performance could not be guaranteed. The Commission submits that mere distribution of this kind of document constitutes conduct in contravention of s 52 for the reasons given in TEC & Tomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38. There is substance in this. There, the misleading conduct was designed to induce the opening of negotiations to purchase goods rather than the final purchase itself. Section 52 was held to be contravened though the court accepted that a purchaser of this type of product would be likely to make inquiries as to the source of the product and discover the true position before completing the transaction. The court considered there was no reason why such conduct could not contravene s 52, independently of the position at the point of sale. In Stuart Alexander & Co v Blenders Pty Ltd (1981) 3 ATPR 40–244, it was held that the makers of Andronicus coffee were not in breach of s 52, despite the Andronicus container having the same shape and using similar background colours on labels as that of Moccona coffee jars. In holding there was no contravention of s 52, Lockhart J adopted a passage from Cadbury–Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1981) 1 WLR 193 at 205: "[The learned trial Judge] accepted that on occasions there was confusion at the point of sale; but he found and there was plenty of evidence on which he could find, that the confusion was almost always corrected before the moment of sale. Such confusion as there was arose, in his view, from the casual attitude of many purchasers in the market to the product offered and not from any failure of the defendant sufficiently to distinguish its product from 'Solo'." 222 The Full Court in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14 produced this synthesis of this line of cases: "The first criticism of his Honour's reasoning on the TP Act claims focused on his observation that while the evidence showed that the dual use of the name 'Sapient' could cause initial confusion, given the sophisticated nature and magnitude of the purchasing decisions of the relevant class of customer, it was unlikely that at the point of contract a customer would be confused as to the identity or nature of the company with which he or she was dealing. In response, it was rightly observed that misleading or deceptive conduct in trade or commerce is not limited to conduct which induces or is likely to induce entry into a transaction. So to propose would be to limit s 52 of the TP Act in a way not justified by its terms. Conduct which misleads a customer so that, under some mistaken impression of a trader's connection or affiliation, he or she opens negotiations or invites approaches may be misleading or deceptive even if the true position emerges before the transaction is concluded … It is consistent with that general proposition, however, to accept that conduct may not be misleading or deceptive or likely to mislead or deceive, notwithstanding that it may engender temporary and commercially irrelevant error …" 223 In speaking about "commercially irrelevant" error, the court here was not, I think, speaking about errors arising in the course of commercial dealings: the whole point of the passage is that some conduct engaged in in the course of commercial dealings, if looked at in isolation, might be thought to infringe s 52, but when looked at in the context of the whole of the activities in question, does not have that character because it has not led anyone to alter their commercial position. Conduct engaged in in commercial activities that produces temporary error and which does not cause anyone to so alter their position may, according to how that conduct is assessed in the entire factual context, not infringe s 52. 224 I consider that, in order to evaluate whether the use of both these documents, Ex C8 tabs 4 and 5, constituted misleading conduct, it is appropriate to have regard to the mass of evidence to which I have referred that deals with the extent to which IMB made it clear to people who attended face to face interviews or seminars that policy performance was not guaranteed. 225 In relation to the allegations by the Commission concerning representations as to the performance of Legal & General policies from early 1992, the Commission relies on statements in the "2001 Rugby League Syndicate – Members Information Portfolio" document widely distributed by IMB in the first half of 1992. It points to statements on the inside cover: "• You invest by contributing to an investment policy … • If you choose to subscribe for shares in the company, the accumulation in the policy provides the funds to finance your purchase of shares in the company." and to the statement at p 4 of the document: "The accumulation of contributions, together with interest earned, is the means to finance the purchase of shares in the Company at each stage of the development." 226 This is followed on the same page by a "proposed share purchase schedule" setting out a program for purchasing a total of 25,000 shares each year between 1993 and 2004 for a total of $25,000. The accompanying text says: "At all times the cash value in your investment policy is higher than the total loan amount …" 227 This table is followed immediately by these statements at p 5: "The timetable for issue of shares is set out on the previous page but may vary depending on – · The timing of various stages of the developments as determined by the company. · The rate of return earned by the policy. The timetable for subscription for shares is such that members will only be required to subscribe for shares in the Company if the cash value of the Policy exceeds the amount to be subscribed for that parcel of shares. If the cash value of the Policy is not sufficient then the date of subscription for the shares is to be extended until such time as the cash value of the Policy is sufficient to provide security to finance the subscription moneys for the shares." 228 A reader, careful enough to detect from a reading of the document at p 4 that the policy is anticipated to produce $25,000 over eleven years from 1993, would also be very likely to understand from p 5 that there was no assurance that the policy would rise to that level of performance. 229 The Commission also relies upon the transcript of a sales seminar prepared by Cowley in March 1993 for presentation to Legal & General. The Commission relies on one passage in the transcript of this video presentation. That passage does not advance the Commission's case. Cowley flags the uncertainty attendant upon the actual performance of the policy he there speaks about. Nor does the Commission's comment that, because this video was prepared for submission for Legal & General in March 1993, it is likely they were careful not to overstate the performance of the Legal & General policies, advance the Commission's case. If this particular video was presented publicly, Cowley's statements about policy performance draw viewers' attention to the uncertainty about that. If presentation of this video was confined to Legal & General representatives, that might well amount to conduct by IMB in trade. But there could be no doubt that Legal & General representatives would fully appreciate the qualification Cowley stated about policy performance. I do not think that Cowley's statement about policy performance, immediately qualified, amounted to conduct that contravened s 52. 230 The Commission also relies upon statements made by Glenn Ivers at the seminar held on 8 September 1993. The Commission submits that, at various points in this seminar presentation, Glenn Ivers makes statements which convey the impression that the Legal & General policies will produce sufficient funds to pay for the shares in ten years' time. Allowing for the need to have regard to the context in which the statements are made, there is substance in the Commission's submission, in relation to the following comments by Glenn Ivers at pp 25 and 26 of the transcript: "We went to some major institutions: Banks, lending institutions. We went to life companies and what we were looking was for simply a capital guaranteed cash fund whereby our 2,000–odd members, our members would simply commit to save some money on a weekly, monthly or a yearly basis, whatever, so that over the course of the development, over the course of the next ten years, they can save that $25,000 as security, capital guaranteed cash fund. We looked at a number of companies, the company we settled on – you may have heard of Legal and General, a life company. … Quite simply, Legal and General is simply a way for our members to save that $25,000 in a capital guaranteed cash fund that is secure. Our members save $30.00 a week. It comes to $130.00 a month. We also suggest that people increase those savings by 7 per cent each year, simply to keep ahead of inflation. Now that's how it works. … These families are simply saving some money each week or each month in capital guaranteed account with Legal and General in their own name, that's the most important point. … But what that will do is 10, 11 years' time, when the underwriter says 'okay, now's your opportunity families to come in and pick up those options at par', those families will be able to say, 'Yes thank you very much, I'll do it.' … Obviously, the Legal and General Fund does pay interest and bonuses on the savings. So that's how it works and that's why I said it was safe because families preserve the options with no obligation. If in 10 years' time it's ventilated and the shares are worth $0.50, then clearly no one's going to come in and buy $0.50 shares for $1.00. If they're worth $1.50 or $2.00 and they look like going to six or ten, then obviously families will come in and take up those options." 231 Nowhere in this transcript is there any statement drawing the attention of listeners to the fact that there is no assurance that the policy will produce the $25,000 necessary to take up the options in ten years' time. Far from constituting such a warning qualification, the statement "But what that will do is 10, 11 years' time, when the underwriter says …" is an assurance that the money will be there when a policyholder has to decide whether or not to take up the shares. 232 As to Ex C8 tab 17A, the Commission witness Graham said it is the transcript of a presentation used at seminars to mid 1992. I have not accepted Graham as a reliable witness. I do not accept that the document was, as he claims, used in seminar presentations in 1992. The witnesses Mr and Mrs Worrall gave apparently credible evidence contradicting that a presentation in accordance with this document was ever made. It contains a number of statements not found anywhere else in the voluminous transcripts of seminar presentations, documentary material produced by IMB and oral evidence. For example, it states: "The company will build this facility and lease it to the 'Logan Sports Club'." and that the management fees to be paid by this club to the company: "are simply distributed every year to the companies (sic) shareholders as a tax paid dividend." 233 Tenboer did not, in her equivocal evidence on this point, accept that this exhibit was a seminar script used by IMB. A number of other witnesses did, as the Commission submits, agree that the material in certain passages in this document put to them in cross–examination was stated at the seminars they attended. But I do not regard this evidence as sufficient to authenticate the document as a script used in its entirety or substantial entirety in IMB's marketing activities. 234 As to Ex C8 tab 18, David Ivers accepted that, though it was a script for seminar presentations prepared by Cowley: "We would have utilised a lot of this document in giving our seminar presentation …". It was used over a period that cannot be identified with any precision. It contains a statement, by way of summing up the investment that the presenter is offering, to the effect that the payment of $25 a week into a capital guaranteed investment fund held by Legal & General will guarantee an investor options on 25,000 $1 shares which could be worth around $100,000 when the rugby league team runs onto the field in 2001. Nothing is stated in this transcript by way of a qualification or warning that a $25 per week investment to 2001 with Legal & General may not yield the necessary $25,000 to purchase the shares. 235 The Commission also relies upon the evidence of four witnesses that statements were made by David Ivers, Cowley and other representatives of IMB as to the values in ten years' time of Legal & General policies of the kind IMB was seeking to sell. I have explained why I am not prepared to accept the evidence of Graham or Dibben. 236 I do not think Mrs Eden's evidence about what Cowley had to say about the need to take out a Legal & General policy in order to reserve options in Logan Lions so that the respondents would have a guarantee that the investor had the funds in ten years' time to exercise those options can fairly be regarded as a statement that the Legal & General policy offered would yield the $25,000 in ten years that Cowley earlier spoke about. But even if what Eden says should be regarded as evidence of such a representation, it is necessary, before accepting that it establishes such a representation was misleading, to evaluate it with all the other evidence to which I have referred. 237 Mrs Colbran says that at the end of an IMB seminar held on 23 June 1993, she spoke with an IMB representative Mr Livesey, who told her that if she was to take out a Legal & General policy and pay $65 per week indexed at 7 percent for ten years, the policy would then be worth $12,500. Livesey repeated this when he called at her home on 7 July 1993 on the occasion she agreed to purchase a policy. Colbran said that when she received the policy documents on 23 July 1993, she noticed that the estimated benefits after ten years were shown as substantially less than $12,500. She says she queried this with an IMB staff member and was assured that her 12,500 shares would be reserved for her until the policy reached the value of $12,500. The respondents were not able to call Livesey. But they called two witnesses, Ball and McCrohon, who purchased policies through Livesey in late June 1993 and April or May 1993. I am not, however, prepared to accept their imprecise evidence as throwing doubt on Colbran's evidence. 238 Statements in some of the material relied upon by the Commission made without any accompanying qualification are capable of constituting conduct contravening s 52. But I do not think that a determination on that issue in relation to those statements can be made by evaluating them in isolation from the mass of evidence called by the respondents which presents a pretty comprehensive picture of how the respondents marketed both the National Mutual and the Legal & General policies. In submitting that the predictions undoubtedly made by IMB as to the National Mutual and Legal & General policies' performance was not adequately qualified, the Commission ignores entirely the evidence from the respondents' Category J sample witnesses and also the evidence of the other thirty–five Category J witnesses who purchased policies. 239 Seventeen of the twenty–two acceptable Category J sample witnesses understood that there was no assurance that the policies they purchased would yield the $25,000 figure mentioned at the seminar they attended. Ten had a clear understanding that whether a particular figure was achieved by the policy at the end of the ten year period was governed by interest rates. The witnesses who had this understanding were Mrs Ward and Duncan, who purchased Legal & General policies in the latter half of 1992; Wainwright, Ms Ashcroft, Mundy, Churchward, Mr Cooper and Brooks, who purchased Legal & General policies in July – August 1993; Mr Duel, who purchased a Legal & General policy in April 1993, and Judge, who purchased a National Mutual policy in October 1991. The other seven witnesses understood that the suggested figure of $25,000 after ten years was approximate only or that there was uncertainty about whether that particular figure would be achieved. All seven purchased Legal & General policies, Ms Moore in October 1992; Mr Lewis, Mrs Cox and Mr Lascelles in February/March 1993; Mr I Beutel in June 1993 and Thomas and Lowe in August/September 1993. Of the other five, four did not deal in their statements with their understanding as to the performance of the policies they bought and were not cross–examined on the matter, while Mr L Nothling, in a brief comment, appears to have suggested he was aware that the $25,000 figure was not assured. (Whitworth, generally a poor witness, was the only one of the Category J sample witnesses who supported the Commission's case here in that she said that her understanding, on the basis of what she was told by the IMB representative Coe when she bought a National Mutual in March 1991, was that a $25 per week investment would give her the money to buy the 25,000 $1 shares in ten years' time.) 240 This analysis of the twenty–two reliable Category J sample witnesses suggests that there was a widespread understanding among people who attended seminars and purchased policies that the figures suggested as the value of the policies after ten years were not assured, with policy performance being governed by movements in interest rates. I regard this body of evidence from the sample witnesses as reflecting the existence of a much larger body of evidence available to the respondents from the general mass of Category J witnesses. There is minimal support only for the Commission's case that people were left by IMB with the belief that the policies would yield a fund sufficient to enable the 25,000 shares (or the 12,500 shares) to be purchased at the end of the ten years. 241 Much the same view emerges from the evidence of the thirty–five Category J witnesses not included in the sample of forty who nevertheless were called by the respondents and from the evidence of three Category J witnesses wrongly included in the sample because they did not attend seminars. Five had such limited recollections of what was said at the seminars as to make their evidence of little use. These were Messrs Michaelian, McCrohon and Fuhrmeister, Mrs Ball, and Mrs J Beutel. Of the remaining thirty–three witnesses, seven, though generally giving useful evidence, either made no comment in their statements or in cross–examination or said they could not recall what was said about policy performance. These were Demaine, Ms Gurling and Messrs Kennedy, Brooks, Craswell, King and Gitsham. Sixteen had a good understanding that the value of the policy they bought after ten years would be dependent upon interest rates. They were Messrs George, Soper, Nolan, Anderson, Quaresmini, Faram, Peterson, de Boer, Martin, K McLean, Taylor, Roche, O'Doherty, Rix, R Finlay and Gaston. Two – Messrs Roycroft and Sillars – came away from the seminar each attended thinking that the policies should be worth approximately $25,000 at the end of ten years. Six understood there was no assurance that the $25,000 figure would be achieved, although some hoped that the policy would cover the cost of buying the shares in ten years' time. This group comprised Foss, Ms McKenna, Mrs Eekelschot, Nicholson, Bolt and Mr Davidson. Only two – Messrs Connor and Thompson – came away from seminars believing that the policies would produce the necessary $25,000. 242 It is necessary that I give proper effect to the weight of evidence available to the respondents from the 439 Category J witnesses, including the thirty–five of those witnesses who were called by the respondents but who were not included in the sample of forty. The mass of this evidence available suggests that most people attending seminars left with an understanding that what was said about future policy values was appropriately qualified. 243 The minimal support for the Commission's case about predictions as to policy performance that comes from the small group of Category J witnesses represented by Whitworth and which includes Connor and Thompson suggests that these persons may have misunderstood or misheard what they were told at the seminars they attended rather than that they are accurate reporters of misleading statements about policy performance made by IMB representatives at a number of seminars. The mass of evidence the other way supports this view of things. 244 Because the overwhelming weight of evidence from a very large pool of witnesses who attended seminars indicates that people generally understood that there could be no assurance that the $25,000 (and associated) figure mentioned during many if not all of these seminars by IMB representatives as the value of the policies in ten years' time was not assured, I am not prepared to find that the unqualified statements about policy performance in the promotional video of September 1991 [Ex C3], Ex C8 tabs 4 and 5, and Ex C8 tab 18 should be accepted as amounting to misleading conduct. I have decided that I should also treat what Glenn Ivers said in the seminar of 8 September 1993 in the same way, ie, as not involving misleading conduct. Two witnesses attended seminars in September 1993. Lowe attended one on 18 September. She left with the understanding that the $25,000 was not assured. Connor, however, believed the figure was an unqualified firm figure. He attended two seminars sometime in September 1993, both being presented by Backo and Glenn Ivers. He attended a third, he thinks the last ever held, later on. There is thus reason to think that his evidence directly supports the Commission's case based on Glenn Ivers' presentation on 8 September 1993. But Connor was only one of a considerable number of people present, if he did in fact attend the seminar of 8 September. I have therefore decided that I should adhere to the view I have formed as to the significance of the mass of evidence pointing to people attending seminars being left with the understanding that policy performance was not guaranteed. 245 It remains to deal with Colbran's evidence. I have accepted that she was told by the IMB representative Livesey and pretty obviously believed that in ten years her policy would be worth $12,500. It may be that, like Livesey, other sale representatives did on occasion make unqualified statements to people about the ten year value of the policies they were selling. But the mass of evidence on this issue to which I have referred suggests that that could not have taken place on anything other than a small scale overall. I am not prepared to find that the statement made by Livesey, out of keeping with the statements made by IMB representatives generally about policy performance, justifies a finding of misleading conduct on this one occasion against all the respondents. The mass of evidence suggests that the respondents did impress upon their sales representatives that they should not make unjustifiable predictions about policy values. 246 The Commission's second argument, that the representations were misleading, is based on the fact that the amounts represented by IMB as future policy values exceeded those published by National Mutual and Legal & General. I have referred to the National Mutual document that shows a ten year value for its policies of $24,369, based on a range of expressed assumptions and other assumptions as to rates of investment return not mentioned in the document, compared with the $25,000 figure represented by the respondents. The Insurance Commissioner authorised insurance offices, including National Mutual and Legal & General, to market their products using investment rates of return fixed by the Commissioner, though (as is apparent from his Circular No 291) the Commissioner was concerned that it was not justifiable to make predictions as to future policy values based on such assumed rates. The insurers knew that. In my opinion, IMB did not engage in conduct contravening s 52 constituted by representing the ten year value of the policies at $25,000. Those misrepresentations were not misleading for the reason here advanced by the Commission, viz, because, by way of example, the $25,000 figure exceeded by a few hundred dollars the ten year figure in the document prepared by National Mutual for IMB. The failure by IMB to adhere exactly to the ten year policy values represented by the insurers is not misleading because of that failure, as the Commission here contends. What is misleading is suggesting that a policy will have a particular value in ten years' time; if that value is stated with apparent precision, rather than as a rounded-off estimate, that reinforces the misleading nature of the statement. But that is not how the Commission put its case on the second ground. Future value of shares 247 The Commission alleged that the respondents engaged in misleading conduct in that they: "21. Represented to the effect that: (a) shares in the third respondent would increase in value; (b) it would be profitable to be a shareholder in the third respondent and a foundation life member of the club; (c) notwithstanding the share would have increased in value over ten years, a policyholder would be able to purchase the shares at $1.00, 'par' or at a 'ground level price'; (d) there was an expectation that 25,000 shares in the third respondent would be worth $100,000 in ten years; (e) reasonable ground existed for the expectations as to the future value of shares in and profitability of the third respondent." 248 The Commission justified its contention that the respondents engaged in misleading conduct by making the statements they did about the future value of the shares primarily on the ground that all such statements were misleading because of the absence of any prospect that the respondents would obtain funding for the project. The respondents joined issue with the Commission here. 249 In my opinion, representations made about share values after October 1992, when IMB put its business plan into the Council identifying, without any justification, Legal & General as the potential lender to the scheme, were misleading. I think it clear that, from this time at the latest, IMB's inaction in taking any steps to locate a lender, a matter critical to the implementation of the scheme, and its reliance only on Cowley to do that show that IMB and those associated with it had no reasonable ground for believing that they would be able to fund the development. Such representations made after October 1992 (like the similar representations previously made) were qualified to a degree to warn people that there could be no assurance as to the future value of shares, ten years hence. But it was, I think, misleading to make statements about the future value of the shares from October 1992 at the latest, and thereafter, suggesting that the shares could turn out to be worth more than the $1 proposed issue price while warning that they might turn out to be less than that, without going on to inform people of the position in relation to the obtaining of finance. It was not enough just to tell people that share values cannot be predicted. The absence of any prospect of obtaining finance was a matter which, at least from October 1992, also needed to be drawn to the attention of people that the respondents were trying to persuade to join the scheme, if the respondents' qualified marketing statements about further share values were not to be misleading, for the reasons stated by Lee J in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40–940. The risk, for want of finance, that the shares whose possible future values were the subject of various representations, albeit qualified by the respondents, might never become available was such a serious risk that its disclosure was necessary, in my opinion, to prevent what was said about future share values being misleading. 250 I also think that the respondents engaged in misleading conduct within par 21 on the basis pleaded by the Commission. Much of the material generated by the respondents on which the Commission here relies is directed to boosting the scheme by emphasising its potential for generating huge profits, particularly from the poker machines. But the sales presentations, recorded in videos and transcripts, do refer, from time to time, to how much more valuable than the $1 issue price shares in the development when the public company is floated are likely to be. 251 IMB's sales pitch, as recorded in this material, developed over time. The transcript of the video presented by Glenn Ivers at the seminar held late in the piece, on 8 September 1993, contains the developed version of this pitch. Cowley was, I think, the person who devised the sales pitch culminating in that presented on 8 September 1993. The evidence indicates, eg, that he devised the "bricks and mortar" analogy used to persuade people that the "risk free" option to take up 25,000 shares in the project in ten years' time was worth having. I have referred to the evidence that shows the impact Cowley had on boosting IMB's performance in selling policies. The passage focusing on the shares which were being offered at $1 in ten years' time is contained at pp 21 to 25 of the transcript. It is necessary to set out a lengthy portion to get an idea of the way the matter was presented at seminars and how the shares, as a potentially very valuable investment, were worked into the presentation. 252 In the lead up to this section of the presentation, the presenter extols the completed development and emphasises how profitable it is likely to be, particularly given that the first stage will have 480 poker machines and eventually there will be 960. The presenter then mentions for the first time the figure of $100,000 in the context of asking: "Can I just ask how many people in the room can handle an extra $100,000 in their back pocket?" 253 The presenter soon after launches into the following passage: "So there's an opportunity for these 3,000 families prior to that happening. The funding as it says, $100 million for a flotation. The first $20 million dollars for Stage 1 of the club is being raised through a private placement to enable it to get under way much quicker. The remaining $100 million dollars as it says on the slide, will eventually – it's intended that will be raised through that flotation. There's also other methods of raising that capital, simply by taking loans against the projections and the result of profits from your poker machines. But the point is, the first $20 million is a private placement from there. As you can also see, when this, when the intended flotation happens, shares will come to the market at a par value of $1.00. What that means, par value is simply the starting price or the ground level price of the shares. Now we're talking about a $120 million dollar lease. Though it's a bit hard to grasp what this could be. But the opportunities for these families is quite simple, prior to any flotation happening. These families have an opportunity as it says, to preserve a position whereby they get to sit on 25,000 options. I'll just write that up. Those options will give those families the opportunity at a later date to come in and purchase and convert those 25,000 options at the par price of $1.00. That's important. I'll go slow through this because it's important that you understand. So that's the position. Now in terms of safety, it's also very important to stress that these 2,600 families who are currently doing this –they've reserved this position or those options but they are – at no time are they obligated to come in and take up those options. So 10 years or so later, when the underwriter says 'okay, now is the time, you have the opportunity to come in and buy these', those families can say 'yes, thank you very much, I will do it' but by the same token, they still have the opportunity to say 'no', they don't want to do it, it doesn't work or whatever. So it's an obligation free position, that's most important. Now as I said, the shares come onto the market at $1.00. It's hard to project and we certainly don't really want to project what the shares will be worth down the track. But 10 years later, you know, the question is, what could an original $1.00 share be worth in that facility? Well we could do a simple analogy. Let's talk about a $100,000 house because it's a little bit simpler and people can grasp it. Just say that a house down the road here on sale for a $100,000 and we go out and we set up a public company. We capitalise that company with 100,000 $1.00 shares, fully paid up and we say "right oh, we'll buy the house". So 1993, we spend $100,000 on that house. Buy as I said $1.00 shares. Now the question I have – I'll ask you a question. Many of you have probably bought and sold houses or bought one and know what it's worth now, but just a question. That house that's worth a $100,000 today, 10 years later, what could it be worth? As I said, no one's right, no one's wrong, depending on the area that you're in or the actual decade we're talking about, probably any one of those could be right, but the point is quite simply this. That if I was one of the original holders of those shares, in 1993 when we bought the house, if it's worth $350,000 ten or so years later, based on the bricks–and–mortar value, what's my original $1.00 share going to be worth? $3.50 Exactly. And in this case, $2.00, in this case a $1.80. So that's simply the point I want to illustrate is that a bricks–and–mortar asset like a house or like a club will always go up in terms of replacement costs because they don't make any more land. But bricks and mortar, we know historically that there's a ten–year growth average or sorry, over the last forty years, there's this average growth in real estate and that's obtained by taking a weighted average of basket from all over the country. But 11.8% compounding is roughly the growth that we'd expect based on history. So based on that history, around $3.00 or $305,000 from the house is what you could expect. So the original $1.00 share in the house, based on bricks and mortar could be on average worth about $3.00, ten years later. That's simply the point. But there's one thing, that this club facility has when you're trying to value a share that the $100,000 house doesn't have, someone tell me what that is? Massive turnover, 960 poker–machines; possibly 100,000 members has the potential to generate a lot of profits, a lot of revenue. So if I'm sitting on an original $1.00 share in this, that's worth say $3.00 in terms of bricks–and–mortar value, I know that next year that facility's going to put out a $50 million dollar profit, say, then there's no way I'll sell it for $3.00 is there? I'm going to miss a lot of dividends if I do. So in valuing shares, you tend to add something on to the potential profits. It's called price–earnings ratio. Now again, I don't want to try and put figures in your minds and say what these shares could be or would be worth 10 years later, but again I'll ask you a question. That club, once it's complete, 10 years after that, based on the bricks–and–mortar value of say three plus some property owned, what would the value worth 10 to 12 years later, of those shares? Would someone like to have a few guesses? Audience Member: Six. Glenn Ivers: That'll double the bricks and mortar. A few more. Audience Member: Ten Glenn Ivers: Ten, Ten up the back. Just trying to illustrate here … Audience Member: Twenty–five Glenn Ivers: Twenty–five, righto that'll do. Does anyone want to say less than six? No, how about we say four. Let's say that some time in the future, ten, twelve, fifteen years later, whatever, the original $1.00 share in that facility was worth not six but say $4.00. Then the simple point is that my family's sitting in the position whereby we hold an option for purchasing that facility to buy 25,000 options at the par price, they eventually go to $4.00, what does that asset become worth? $100,000. So folks quite simply that's the potential that we see for these 3,000 families. It's an opportunity to sit in this position with no obligation, we know that the share value will rise because of the bricks and mortar, we know that the potential profits, we know the potential of the facility. If they do go to $4.00 as we said, then at some stage once they do hit that mark, these families will be sitting on a position whereby they could be sitting on an asset of $100,000. If they ever go to $10.00, then it's worth a quarter of a million, that's the simplest, but as I said, the point is, the families are sitting on these options, they're sitting on them with no obligation, so if 10 years later something's gone terribly wrong and that thing's become a white elephant and it's fallen over and sunk into a swamp or something, these shares are worth fifty cents or if for some reason, it never ever got off the ground, the important point is that the families who hold these options can never lose any money because they hold them without obligation. Most important. Now you may be looking at it and saying 'yes, it looks nice, I can sit on 25,000 options with no obligation to come in at par'. But you may also have twigged and seen obviously that when that happens. When you have that opportunity to come in and convert those options, you're going to have to do something and that something is, you're going to have to come up with $25,000.00 obviously, even to come in at par. So what we've done, what we did three years ago. We said look what we want is community ownership. What we want is a way where we can preserve these options for these families in a way that they can actually do it and actually cash in on some of the potential. Now I don't know how you're all situated financially, but how many of you can't come up with 25,000 tonight? Maybe some of you can and for those people, then that's great. These options can be yours. However, we know and from the hands it's confirmed again that 99 per cent of people will never be in a position where they have 25,000, a lazy 25,000 sitting around. Which is why most major public companies, most major developments are owned by wealthy people. This is different, this is for 3,000 people that aren't necessarily wealthy. For those people, what we've designed is a way where they could preserve the options and when the time comes ten years later, actually afford to be able to come in and buy those options and it's quite simple how it works." 254 At this point, the IMB presenter moves on to explain how people can secure the 25,000 options exercisable in ten years' time by taking out a Legal & General policy. But in the passage set out above, the enormous profit potential of the development is repeatedly emphasised. People are, by the "simple analogy" to the house, shown how shares issued at $1 (as it was intended the shares in the scheme company would be) can almost automatically rise three–fold in ten years because "a bricks–and–mortar asset like a house or like a club will always go up in terms of replacement costs because they don't make any more land". The potential for shares in the scheme to appreciate by an even greater amount is then emphasised by reminding people that the proposed club facility has something that a house does not have: "Massive turnover, 960 poker–machines; possibly 100,000 members has the potential to generate a lot of profits, a lot of revenue". Having invited the audience to guess what shares in the club will be worth ten years later on and obtained figures of $6, $10 and $25 from the floor, the presenter suggests, in that context, a highly conservative $4, with the 25,000 options accordingly being worth $100,000 in ten years' time. The presenter does warn the audience that shares and, particularly those to be offered in the scheme, will not necessarily rise at a number of points in this passage, saying: "It's hard to project and we certainly don't really want to project what the shares will be worth down the track" and "Now again, I don't want to try and put figures in your minds and say what these shares could be or would be worth 10 years later …". Towards the end of this section of the sales pitch, the presenter then focuses on the possibility that the project may be a failure and may even not get off the ground. But this is not couched in the form of a caution against assuming that the shares will rise. Rather, it is the lead–in to how, by buying a Legal & General policy, people can secure 25,000 options which, when exercisable in ten years' time, may be very valuable and how even if the project were ultimately to fail, their ownership of the policy ensures that they face no financial risk themselves. 255 Despite the warnings about the absence of an assurance that shares would increase in value over time, this part of the presentation is pitched in a way very likely to leave people with the impression that, though there could be no guarantee, the features of the IMB project were such that the shares in it, which would be available in ten years' time, would very likely be worth a lot more then than the $1 price that people to whom this presentation was made could secure. This part of the sales presentation appears to be designed to encourage people to buy the policies that would ensure they would be able to afford the 25,000 $1 shares offered when they became available in ten years' time. 256 A number of the Commission's witnesses gave evidence of what they were told by IMB representatives about future share values. Mrs Webster, who attended the seminar on 8 September 1993, gave brief evidence that was broadly consistent with the transcript of Glenn Ivers' presentation to that seminar, referring to the comments made about the increase in value of real estate and to these comments by the presenter: "We can not guarantee a return, but it would most certainly be a minimum of $100 000 on a $25 000 investment. The shares could possibly be worth $6 to $8, but most certainly a minimum of $4." 257 Lowe attended a seminar on 18 September, not the one Webster attended on 8 September 1993, as the respondents suggest. Connor attended a seminar in September 1993, but did not say it was the one attended by Webster on 8 September. These two witnesses called by the respondents do not cast any doubt on Webster's evidence. Eden attended a seminar on 4 November 1992. In her written statement, she says Cowley said during this seminar: "In ten years the shares would be worth at least $4, possibly $12, and $20 is not out of the question." 258 However, when she was asked in cross–examination whether Cowley asked the audience to nominate the price they thought the shares would be worth or whether he said the words she ascribed to him in her statement, she replied: "I believe he said something like, 'Would $4 per share sound good?' And people said that they thought that would be good. You know, if you paid $1 for a share and it was then worth 4, would this be a good thing." 259 On the face of it, this answer casts doubt on the reliability of her recollection, as recorded in her statement. She was not re–examined. 260 Matlick said that after attending an IMB seminar at her workplace, she arranged to meet an IMB representative at IMB's offices at Springwood. This was in July 1991. She then purchased a policy. In the course of this meeting, the IMB representative told her that the shares could be worth a minimum of 3.7 times their value in ten years. She was the only witness who said that the future value of the shares was expressed as such a ratio. She was cross–examined about this particular statement. In early April 1991, Hansen attended a small IMB seminar at which Backo and David Ivers spoke. He says in the course of this seminar the latter said: "You will be able to name your own price for the shares in the future as they will be sought after." 261 He was not cross–examined on this piece of puffery. Mr Rutherford, who attended a seminar in Rockhampton in April 1993 run by Backo, gave the briefest of evidence to the effect that Backo said "the shares would increase in value in the future". He was not cross–examined on this. Matijasevic, who attended seminars in the July/August 1993 period, in the course of his duties as an IMB sales representative, gave brief evidence consistent with what Glenn Ivers is recorded as having said at the seminar on 8 September 1993. He says that, in relation to the likely future worth of shares, figures offered by the audience ranging from $4 to $12 were written up on the whiteboard by the seminar presenter and that a figure less than $1 was never written up. 262 The twenty–two Category J sample witnesses I have referred to as generally giving useful evidence have a variety of recollections as to exactly what was said at the seminars they attended. But they expressed clear views on the future value of the shares the subject of discussion at those seminars. Nine had a clear impression that the shares would probably increase substantially in value, but were aware that that was not definite and there was no guarantee. The evidence of Duel is typical of this group. He said: "I was told that the value of shares in Logan Lions could go down however I believed that the project had potential to be a great success, and that a ground level shareholding had the potential to increase in value." 263 Of this group of nine, Lane and Miss White attended seminars in the latter part of 1991; Duncan in the second half of 1992 and Cox, L Nothling, I Beutel, Thomas, Duel and Lowe between February and September 1993. Four – Mr Judge (who attended a seminar in October 1991) and Elliott, Ashcroft and Mundy (who attended seminars between February and July 1993) – considered in effect that the shares would be worth a lot, that they could not lose on them. Eight – Ward, Moore, Lascelles, Wainwright, Lewis, Churchward, Brooks and Mr Wisby – indicated that the impression they took away from the seminar was that the future value of the shares could not be predicted, that it was a matter of "wait and see". Moore and Ward attended seminars in the latter part of 1992, while the others in this group of eight attended seminars between February and July 1993. Cooper, who attended a seminar in August 1993, had no particular recollection about comments concerning the future value of the shares. A substantial majority of these twenty–two witnesses came away with the impression that the shares would very likely increase substantially in value, though most in this group were aware that that was not guaranteed. Of the eight witnesses who were of the view that no prediction as to future share values could sensibly be made, some, eg, Lascelles, may have been influenced by their own experience as shareholders. The views of this group of twenty–two witnesses reflect, I think, the way the share element of the project was promoted by IMB over the entire period. It reflects what I think to be an approach that culminated in the sales pitch recorded in the transcript of the seminar of 8 September 1993. 264 Thirty–one of the thirty–five Category J witnesses not included in the sample of forty plus the three Category J witnesses wrongly included in the sample who gave what I regard as useful evidence on this issue were a little more optimistic than the twenty–two sample witnesses about future share values. Only six of the thirty–one – Thompson, Martin, Gurling, Taylor, Davidson and Roche – were left with the impression, either based on what they gathered from the seminar they attended or on their own personal knowledge, that future share values could not be predicted. Eighteen – George, Connor, Kennedy, Brooks, Nolan, Anderson, Eekelschot, Craswell, Bolt, Peterson, de Boer, Gaston, Rix, K McLean, Gitsham, Sillars, R Finlay and O'Doherty – were left, as a result of what they were told at the seminars, with a clear impression that the shares would probably increase substantially in value, though they appreciated that there was no guarantee. Seven – Soper, Roycroft, McKenna, Nicholson, Quaresmini, King and Foss – came away from seminars with the impression that the shares were likely to be worth a lot in the future. 265 The evidence of these two groups of witnesses called by the respondents thus tends to confirm the inference to be drawn from the manner in which future share values were represented at IMB seminars culminating in the most developed form of those representations made at the seminar of 8 September 1993. Though I accept words of qualification were used from time to time by the IMB presenters of the various seminars in the context of talking about the potential of the project and the future value of the associated shares, those qualifications had limited effect. A substantial majority of people attending the seminars left with the impression created by the representations made by the IMB respondents that the shares would probably increase substantially in value, even though many were aware that there was no guarantee of that. There is no dispute that there can be no reasonable grounds for representing that shares will increase in value in the future, particularly over as long a period as ten years. That would be the position even if there had been some prospect of the respondents raising the finance necessary to build the project. That is simply a consequence of the unpredictable nature of the share market. But there are numerous other considerations that show the absence of any reasonable grounds for IMB making any representations to the effect that the shares proposed to be issued in ten years' time would increase in value above the proposed $1 issue price. The legislative limitations on the number of poker machines the project could operate falsified IMB's optimism about future share values, which was expressed to be based, in large part, on the profits likely to come from a very large number of machines. As Rodin points out, the relationship between the proposed club and the public company in which the shares would be issued was such as to cast doubt on whether those shares would ultimately be seen as a valuable commodity, even if the club came into existence and operated successfully. IMB's suggestion was that the public company's income from club activities would be in the form of rentals and management fees paid by the club. Rodin also pointed to the restrictions on the capacity of clubs like that envisaged by IMB to distribute profits. COUNCIL APPROVAL 266 In pars 22 and 23 of its statement of claim of 6 October 1999, the Commission alleges that the respondents made a range of representations about having already obtained Council approval to the development of a club, stadium and associated facilities at Meakin Park, together with representations that it had an expectation in the future of obtaining such approval from the Council in the future. The Commission made similar allegations in relation to Logan Park. 267 Its case, in relation to Meakin Park, comprised the following allegations, which are an edited paraphrase of par 22 of its last pleading of October 1999: 22. In the period from in or about March 1991 until in or about June 1993, the first respondent made representations to the effect that: (a) the first respondent had applied to the Logan City Council for approval for the club, stadium and associated facilities to be constructed at Meakin Park; (b) the Logan City Council: (i) supported the development of the club, stadium and associated facilities at Meakin Park; (ii) approved of the first respondent's proposal for the club, stadium and associated facilities to be constructed at Meakin Park; (iii) had agreed to, or was likely to agree to, or had promised to grant a lease over Meakin Park for the club, stadium and associated facilities; (c) reasonable grounds existed for the statements as to (b)(i) and (iii) in relation to Meakin Park. 268 Its case in relation to Logan Park is as follows: "23. In the period July 1993 to in or about September 1993, made representations to the effect that: (a) the Logan City Council had granted a lease with respect to Logan Park; (b) the Logan City Council had granted approval to go ahead with the development at Logan Park; (c) it was the first respondent's expectation that the club, stadium and associated facilities would be constructed at Logan Park; (d) impliedly, reasonable ground existed for the expectation in (c)." 269 The Commission did not pursue, in its closing submissions, the further allegation in par 32(b) as follows: "(b) The statements referred to in paragraphs 22 and 23 constituted representations that the scheme had approvals that it did not in fact have in contravention of s.53(d) of the Act." 270 So far as Meakin Park is concerned, the Commission, in closing submissions, abandoned the allegation in par 22(c) as it appears in its pleading of 6 October 1999, but not in the paraphrase set out above, that representations were made that it was IMB's expectation that the project would be constructed there. I do not understand from the closing submissions made by the Commission that it is pursuing the allegation in par 22(a) of its current pleading repeated in the version of par 22 set out above that the respondents engaged in conduct contravening s 52 by making representations to the effect there alleged. 271 It is convenient to deal with the allegations in par 22(b), that the respondents made representations about existing or past matters of fact comprising the Council's support for the development of Meakin Park, its having approved IMB's proposal for that development there and that the Council had agreed to grant a lease over Meakin Park for the development. 272 In so far as the respondents made representations both orally at seminars and in written material produced and distributed by IMB to the effect that IMB had Council support for the development of the project at Meakin Park, that did not, in my opinion, involve any conduct in contravention of s 52 the TPA. 273 From early 1991 to well into 1992, it was, I think, a fair statement of the position to say that the IMB proposal, in so far as it related to the development of Meakin Park, did have Council support. The Commission here does not suggest that it would be misleading or deceptive for a developer to say that its project has Council support unless and until a formal resolution has been passed by Council granting all the town planning and building approvals necessary to permit a project to proceed. As the evidence of Deputy Mayor Ayling demonstrates, that is simply not the way local authorities go about dealing with major development proposals. His evidence shows that, once councillors who are members of the relevant council committees consider that a major development proposal is worth encouraging, Logan City Council, like many other councils, engages in an informal process of discussion and consultation with the developer with a view to identifying the requirements that the developer will have to satisfy before it is appropriate or even useful for the developer to lodge applications for the formal approval of Council. That is what happened here. Deputy Mayor Ayling's evidence and the attitude of various councillors and of the Council itself to the IMB proposal for Meakin Park, as revealed by the events listed in the chronology that took place on 15 May 1991, 3 July 1991, 12 December 1991 and 2 December 1992, show that the respondents were justified in making representations to the effect that their proposed development had Council support. 274 The Commission contended that one respect in which the respondents contravened s 52, as alleged in par 22, was that they continued to make representations of the kind set out in par 22 about Meakin Park after they had decided to abandon Meakin Park for Logan Park. It is not possible to determine just when it was that IMB decided to site the development in Logan Park, rather than Meakin Park. It appears that the impetus for this change came from within the Council. There was a meeting between IMB representatives and the Mayor and the Deputy Mayor in early May 1993 at which those two officials suggested that the development should be relocated to Logan Park for a number of reasons that had been identified within the Council. The Town Clerk, Mr Kellar, could only say that: "[S]omewhere between about the end of '92 and the middle of '93 the focus changed from Meakin Park to Logan Park and it was only done in discussions in informal meetings …" 275 He referred to the Logan Lions business plan of July 1993 as being the first documentation on Council files that identified Logan Park, rather than Meakin Park, as the site for the development. Drawings prepared by an IMB consultant, Mr Nelson, dated 7 March 1993 refer to Logan Park. But, as Hansen's evidence, later discussed, suggests, the date on an architect's drawing may not be a reliable indicator of when events have occurred. 276 Against this uncertain background, I am not prepared to accept that, even if Colbran was told as late as June 1993 at a seminar she then attended that the club was to be constructed at Meakin Park, that showed that the respondents engaged in conduct in contravention of s 52 in any of the respects alleged in par 22 of the Commission's current pleading. 277 In this context, the Commission also relied upon the transcript of a training seminar presented by Cowley to IMB sales staff in July 1993 which records the statement that, though there were concerns emerging about the suitability of Meakin Park: "we will still have the opportunity to develop Meakin Park into other sports arenas …". Tenboer, who attended this staff seminar, does not recall any such statement. But even if it was made, I do not, for the same reasons I have given in relation to Colbran, think that this provides a basis for the conclusion that the respondents engaged in misleading conduct of the kind alleged in par 22 by Cowley telling sales staff in early July 1993 that Meakin Park was still involved in the proposal and, by inference, that people who had contact with those sales staff may have been told the same thing about Meakin Park. 278 A number of the Commission's witnesses gave evidence of hearing statements made by IMB representatives at seminars to the effect that IMB had an assured title from the Council to Meakin Park. 279 I have explained why I am not prepared to accept the evidence of Graham and Dibben as sufficiently reliable. 280 Hansen said that at a seminar he attended in April 1991, David Ivers said words to the effect that "[w]e've been promised land at Meakin Park by Council …". He bought a National Mutual policy soon afterwards. (He says he was given the "2001 Rugby League Syndicate" document attached to his statement at that April 1991 meeting, though it includes copies of architect's plans dated "November 1991".) 281 Mrs Jones said that at a sales seminar she attended on 14 September 1991, Backo, in response to a question by a member of the audience at one stage, pointed out the window to Meakin Park and said words to the effect that "[t]he syndicate has a guarantee of this land. The Logan City Council has promised it to the syndicate …". Mr Christie attended what seems to be the same meeting of 14 September 1991 that Mr and Mrs Jones attended: the two families went together to a meeting addressed by both Backo and David Ivers. Both Mrs Jones and Christie speak of each being given a video to take to show friends who might be interested in joining the syndicate. Christie does not mention any comment by Backo of the kind described by Mrs Jones. He, however, refers to a statement by David Ivers to the effect: "Council will let us have the land at Meakin Park for $1 million". Mrs Jones does not mention such a comment. Deputy Mayor Ayling and Roycroft, the respondents' witnesses, were at the same meeting on 14 September 1991 attended by Mrs Jones and Christie. They do not support either Mrs Jones or Christie and recall quite different statements about the extent to which IMB then had security of tenure in respect of Meakin Park. Roycroft's recollection of what he was told of the status of the respondents' dealings with the Council was that certain councillors agreed with IMB's ideas and liked the concept of a multi–sports complex. It is rather unlikely that, if Backo had publicly stated that IMB had "a guarantee of" Meakin Park from the Council or if David Ivers had spoken of an agreement to get the land for $1,000,000, the Deputy Mayor would not have recalled that. 282 Matlick says that she and her husband, in late June/early July 1991, met with an IMB sales representative who told them, among other things, that "they had a 99 year perpetual lease on the Meakin Park Sewerage site land". Glenn Ivers said the IMB representative she dealt with appears to have been Coe. 283 Other Commission witnesses gave more qualified evidence about why they got the impression from what they were told that IMB had a Council assurance of tenure to the land. Colbran may have gained that impression not from being told in so many words that IMB did in fact have Council approval for the land, but because she inferred that they must have had that approval because of what they had to say about Meakin Park being where the club was going to be built. Eden, in her first statement of 14 October 1993, said she gained the impression from what Glenn Ivers told her at a seminar on 4 November 1992 that "Council approval would not be a problem", then saying only that Glenn Ivers added that Mayor Golledge was a founding member. In her supplementary statement of 26 July 1996, she said, however, she gained that impression because he said words to the effect: "Verbal approval has been obtained" and that "we have the land". She made no mention of these matters in her earlier statement as having caused her to get the impression she did about Council approval not being a problem. Rutherford said that, at the seminar conducted in Rockhampton in April 1993 by Backo, the latter gave Rutherford the impression that Logan Lions had been given Council approval for the development at Meakin Park. He does not explain the basis on which he got this particular impression, though it appears he was told by Backo that construction was expected to be under way by Christmas 1993 and, it may be because of this, that he drew inferences about Logan Lions having secured the finance to fund the development (as he said he did) and about having the necessary Council approvals. 284 I accept that these Commission witnesses attempted to give their honest recollections of what was said on particular topics in the course of fairly lengthy meetings with IMB representatives. But assessment of the significance of their evidence cannot be made without evaluating the evidence of the Category J witnesses, both sample and non–sample, who were called by the respondents to give evidence about this issue. 285 The twenty–two Category J sample witnesses, who I have indicated gave evidence which I regard as of use, gave evidence of having a range of understandings with respect to IMB obtaining a lease from the Council over Meakin and then Logan Parks. But all believed that no lease had been granted and no binding agreement to give a lease had been reached at the dates of the seminars they attended between 3 August 1991 and 18 September 1993. The witnesses White, Judge and Lane, who attended seminars in August and October 1991, each said that what they were told was to the effect that, while discussions were under way between IMB and the Council, no lease had then been obtained. The witnesses Ward, Moore and Duncan, who attended seminars in August, October and December 1992, each gave evidence contrary to the notion that those seminars were told that the Council had granted or agreed to grant or had already approved the grant of a lease over Meakin Park. The witnesses Lewis, Cox, Lascelles, Wisby, Duel, L Nothling and I Beutel gave evidence of having attended seminars in February, March, April and June 1993. The evidence given by each, though differing quite widely in its terms, was all to the general effect that, while IMB was hopeful of obtaining Meakin Park, no firm decision had been made and there was no guarantee that they would get it. 286 The witness Churchward, who attended a seminar on 8 July 1993, said that he understood that IMB was awaiting Council approval. He also gave evidence of there being some uncertainty about just where it was then intended to build the complex; he referred to two separate areas, one appearing to be Meakin Park, the other Logan Park, as the two areas then under consideration. The witnesses Ashcroft and Mundy, who attended seminars on 10 and 12 July 1993, gave evidence to similar effect to that of Churchward about there being uncertainty as to the exact site for the development, with no definite decision being made by Council though it was favourably disposed to the project. That these three witnesses who attended different seminars in early July 1999 each recalls being told something of the change from Meakin Park to Logan Park as the site for the development enhances, I think, their reliability as accurate reporters of what was said on each occasion. 287 The witness Brooks, who attended a seminar on 14 July 1993, said, in unchallenged evidence, that his understanding of the status of Logan Lions' application for a long term lease over Logan City Council land was that: "The project was okay in principle, but that there were no guarantees. We understood that all work with Council was preliminary and no agreements were entered into". Elliott, who attended a seminar in February 1993, gave similar evidence. The witnesses Wainwright, Cooper and Thomas attended seminars between mid July and late August 1993. All three gave evidence, again differing in its terms, but to the general effect that a lease had been applied for, but no decision had been made by Council. Lowe gave evidence of attending a seminar on 18 September 1993. She understood that a long–term lease had been applied for by Logan Lions and that as long as the Council's criteria were met, "there was a very good chance that it could be approved". 288 The evidence of these twenty–two sample witnesses suggests that there is a very substantial body of evidence available to the respondents showing that it is unlikely that the respondents made representations with respect to Meakin Park and Logan Park of the kind the subject of the Commission's allegations in pars 22(b)(ii) and (iii) and 23 of the Commission's pleading. 289 So far as the numerous witnesses called in addition to the thirty–three Category J sample witnesses are concerned, the Commission criticises the summaries made in closing submissions of the evidence of a small number of these witnesses and submits that the summaries cannot therefore be relied on. But, apart from this, the Commission does not suggest that the summaries of evidence of the other witnesses are unreliable. The Commission says, eg, that the witness Rix, who according to the respondents' summary gave evidence in relation to the lease approval issue in his written statement that "[t]he status of the application was that it was an application and nothing was yet approved", was not cross–examined. The Commission says this is wrong. However, reference to the transcript said by the Commission to demonstrate this erroneous statement shows that the summary correctly states that Rix was not cross–examined about his understanding of the status of the respondents' title to any Council land. Though he was cross–examined, as the Commission suggests, at transcript p 1286 about some matters touching on the Council's attitude to the project, he was not cross–examined on this particular important evidence. The respondents accurately summarise what the witness Kennedy has to say in his statement about the Council's attitude to the project being that it "was okay in principle but there was no guarantees". The Commission comments simply that "the reference to the evidence of Mr Bernard Kennedy in the 'Logan City Council' column [of the summary] is incorrect". The reference to transcript p 2014 is, as the Commission contends, wrong. However, if one goes to transcript p 2099, Kennedy explains the basis for his opinion in cross–examination. The same criticism is made of the summary of the evidence of Bert George. The summary is accurate, though the transcript reference should be to p 1496. 290 Reference to the evidence of this class of witness generally shows that the summaries of their evidence in relation to the Council tenure issue are accurate and that these witnesses, generally speaking, gave evidence of being told at seminars or by IMB representatives about IMB's optimism at getting tenure from the Council, but also being told, in effect, that there was no guarantee that a lease would be granted or that the matter had got no further than that the Council was considering IMB's application and was favourably disposed to it. 291 There is such a mass of evidence contradicting the limited body of evidence produced by the Commission in relation to the issues concerning Council approval raised in pars 22 and 23 of the Commission's pleading that I am not prepared to find that the Commission has made out any case within pars 22 and 23 of its pleading. 292 The Commission also relies on statements in various of the documents, including transcripts of seminars, prepared by the respondents. It submits that statements made at seminars, including statements about the imminent commencement of construction, also "create the impression that approval had been obtained" from the Council. But it is unclear whether some of this material was ever displayed to any members of the public, while printed material that was publicly disseminated generally records that IMB did not have any unqualified right to use Meakin Park for the project. For example, the "Members Information Portfolio" document used through the first half of 1992 refers, at p 10, to each stage of the project only being undertaken when the approval of the various government and local authorities is in place. At p 12, the document states that the club facilities will be on Logan City Council land "subject to a long term lease to the Company yet to be finalised". Page 8 describes Meakin Park as "the proposed site" and p 9 states: "Negotiations with both Local and State Government have uncovered a groundswell of support for the project". 293 The respondents undoubtedly presented an optimistic view of their prospects of obtaining a lease of Meakin Park from the Council. But, in their written material, they generally put suitable qualifications on their optimistic statements to prevent it being said that they were representing that they had already secured from the Council tenure to Meakin Park. FINANCE APPROVAL 294 The Commission says in its written submission that par 30 of the further amended statement of claim alleges that: "in the period from in or about June 1993 to in or about September 1992 (sic – should be 1993), the first respondent represented to the effect that finance in an amount of $20 million had been approved for the development." 295 This is a more limited allegation than that made with respect to "finance approval" in par 29 of the Commission's last pleading, the further further amended statement of claim filed 6 October 1999. The respondents did not object to dealing with the case on this issue, so framed. 296 The allegation here is that the respondents made a representation as to an existing fact, viz, that certain finance had already been arranged. The Commission's case is that that representation was misleading or deceptive because no such finance had been arranged at any relevant time. 297 It was in mid 1992, after Cowley joined IMB, that IMB decided to abandon the idea of using the loan facility of each policy as the source of direct funding for the project and seek external funding secured by, among other things, assignments of the policies to the lender. As is apparent from the statements made in the business plan IMB submitted to the Council three months later, in October 1992, no progress had been made in identifying an external lender for the project. The business plan identified the principal avenue for funding as Legal & General. But the respondents had no basis for thinking Legal & General might seriously consider taking on that role. Immediately after Legal & General learned of the suggestion made to the Council by IMB for its involvement as potential funder for the project, it took action to ensure that IMB would not repeat that suggestion. 298 By October 1992, only about 1,200 policies had been sold. Between November 1992 and September 1993, however, a further 2,000 policies were sold: in this period a major effort was put into persuading people to invest in the scheme by buying policies. But despite this intense and successful activity engaged in by the respondents, they continued to make no progress at all in finding someone prepared to finance the project. It was not until May 1993 that Cowley was engaged on a formal basis as a consultant to IMB. It was only then, according to David Ivers, that Cowley "became virtually full time on the project", with his "primary task" being to secure funding for the project. In June 1993, soon after it had been incorporated, the third respondent submitted its own business plan to Logan City Council. This plan was prepared by Cowley with input from some of the other respondents. In the section headed "The Funds Required – Reason & Route", the document states: "The company intends developing stage 1 with a private placement of AUD$20 million." 299 It is apparent from the section of this plan dealing with what is referred to as "the route" for raising this money that the position remained the same as it was when, a year previously, IMB first decided to fund the project with borrowings from an external lender: the respondents were no closer to identifying anyone who might fill that role. 300 On 15 September 1993, IMB staged its national media launch. All respondents were present. In the course of this launch, Cowley, introduced as representing "Investment Suisse SA", stated: "You can't do anything without money and for the last seven weeks I have been overseas talking to banks and to other institutions putting in place guarantees because we had the funding here in Australia for Stage 1 through a private placement of $20 million from the IFR Group out of Melbourne subject to the appropriate supporting bank guarantees. We've put that in place. First Collateral Assurety Corporation who specialise in underwriting projects like this have put the guarantees in place and subject to the transaction or documentation now that's being prepared, IFR group will fund the initial Stage 1 through this private placement and I would just like to welcome to the platform – would you help me welcome Peter Agathonoff representing the IFR Group." 301 Mr Agathonoff responded to Cowley's invitation by saying: "It is our intention to fund the first stage of the $20 million of the Logan Lions because we believe its a worthwhile project to the community and subject to the necessary documentation we will fund Stage 1." 302 The statements made on 15 September 1993 by Cowley and Agathonoff are the only evidence put forward by the respondents suggesting they had actually been able to identify someone prepared to provide finance for the scheme. 303 But Glenn Ivers says it was at this very time he began to suspect whether Cowley was acting bona fide. On 17 September 1993, the local media reported statements by Cowley about him being confident that the loan would go ahead. The reaction of McLean, Glenn Ivers and John Ivers was to speak with David Ivers about their suspicions as to whether they could have any confidence in Cowley's claims that funding had been arranged. No loan funds ever materialised and, at the start of the trial, the respondents acknowledged that Cowley was a fraud and had never arranged on any basis, conditional or otherwise, any loan funding for the project. 304 It is clear that the respondents never at any time had any ground for representing or for allowing any of the staff of IMB to represent that funding for any part of the scheme was ever in place. 305 The Commission witness Colbran said in her statement of 28 September 1993 that, at the seminar she attended on 23 June 1993, a couple of people spoke about the project. One was Backo. She said that from what she was told by these people, she was given the impression that the IMB group had secured $20,000,000 in overseas funding for the development of the first stage of the complex. She elaborated on this in her further statement of 18 July 1996 by saying that she could recall one of the speakers at that seminar saying words to the effect: "We have got financial backing for $20 million". Colbran was clear in her recollection that what she was told indicated that IMB had definitely got this finance. IMB's witness Fuhrmeister, who attended this same seminar, denies that any statement about IMB having $20,000,000 was then made, though his recollection of the details of what was said at the seminar is, in some respects, poor: he "can't remember" how the project was to be funded. Mr and Mrs Nothling also attended this same seminar. They both denied being told that $20,000,000 of finance had been obtained. Backo, it appears, was present at this seminar and, as I have said, did not give evidence. I do not doubt that Colbran has made an honest attempt to recount what took place at the seminar. But I am not prepared to find that an unqualified statement about finance to the extent of $20,000,000 having by then been arranged was made. She is the only witness who suggests such a statement was made so early in the piece. This seminar took place at a time when all respondents well knew that no progress had been made in identifying a source of any loan funds. It took place at the time IMB put its business plan into the Council, from which it was abundantly clear that no finance had been arranged. I think it unlikely that the respondents would have made or would have permitted staff to make an unqualified statement about finance at that early time. Her evidence is also contradicted by the Nothlings and Fuhrmeister. Colbran may have been unwittingly influenced by the fact that there was a good deal of publicity in the media about IMB, which included a number of statements purporting to come from IMB to the effect that it had a lender prepared to advance the first $20,000,000 needed for Stage 1 of the project in the fortnight before she gave her witness statement to the Commission. 306 The Commission's witness Rutherford does not take the matter any further: he gave evidence of a visit by Backo to the North Rockhampton Rugby League's Club in about April 1993, during which Backo, in effect, conducted a sales seminar. Rutherford said that Backo gave him the impression that Logan Lions had secured capital to fund the development. But he said he only got that impression because of what Backo said about construction getting under way by Christmas 1993. 307 Matijasevic, who worked for IMB as a field interviewer/consultant from the end of June 1993 to the end of August 1993, said in his statement to the Commission of 4 October 1993 that some time in this period he was told by the respondents Musgrave, Stone, the Ivers brothers and other IMB management, that IMB had the $20,000,000 capital for the development. When he learned that Cowley had gone overseas to get the money, he realised that that was untrue. Matijasevic gave a statement to Stone himself dated 27 February 1996. He said in it he could recall being told by another IMB employee, Wilkinson, "and others whom I can't now remember" that "we have the money". He said he was not told anything further about it and simply assumed that that meant the initial $20,000,000 was in place, but the question was not discussed any further. He did not then identify the respondent Stone as one of those "others", though he did that in his earlier statement to the Commission. In a supplementary statement to the Commission of 30 October 1996, he referred to this statement he had given to Stone in which he mentioned being told by Wilkinson during the period of his employment "we have the money". He there gave a more elaborate account of this incident. He mentioned for the first time that he had this conversation with Wilkinson in the context of statements having been made at seminars to the effect that finance to fund the first stage of the development was available. He went on to say that he asked Wilkinson whether IMB had got the $20,000,000, to which she replied in the affirmative. Though I think Matijasevic is in general a reliable witness, I am not prepared to find that the respondents made representations that contravened s 52 to the effect that finance had been secured. I do not accept his evidence as going beyond establishing that Wilkinson told him privately at some time in the July/August period that finance had been secured. 308 I do not accept these Commission witnesses as establishing that during the period between June 1993 and September 1993 the first respondent, or anyone acting for it, made representations to the effect that finance of $20,000,000 had been obtained for the project. But that is not the end of this issue. 309 The Commission witness Stokes gave explicit evidence that, at the seminar he attended on 16 September 1993, conducted for the purpose of persuading as many as possible of the eighty to one hundred people in attendance to purchase Legal & General policies, both the speaker he could not identify and Backo separately gave him the impression that IMB had secured a $20,000,000 bank assurance. He said that: "The speaker said it was announced at the launch at the Beenleigh Rum Distillery on 15 September 1993." There is no suggestion that Stokes attended the launch. But Cowley and Agathonoff there made unqualified statements to the effect that finance in an amount of $20,000,000 had been obtained. Stokes was not cross–examined on what he had to say about this. Backo did not go into the witness box. 310 The Commission witness Webster attended an IMB/Logan Lions seminar a little before Stokes' seminar, on 8 September 1993. She spoke to a Logan Lions sale representative, Sue Bird, at the end of the seminar. Webster said that the presenter she did not identify (though it was not David Ivers or Backo, both of whom she saw there at various times) made an unqualified statement that they had a particular amount of capital to construct the first stage of the project. Though Webster could not recall the figure stated by the seminar presenter in this context, she was certain that "they gave a figure" and "they indicated they had the money". Webster rejected the suggestion in cross–examination that all that had been said at the seminar was that IMB had someone overseas at the moment and they were confident of getting a large sum of money as capital for the first stage of the development. 311 There is evidence coming from the respondents that supports what Stokes and Webster had to say in so far as on both 16 September 1993 and subsequently, various of the respondents made statements that $20,000,000 in finance had been arranged in circumstances in which it can be inferred that the respondents intended those statements to be accepted, though they were not made in the context of sales seminars. In his letter of 16 September 1993 to Legal & General, in which he dealt with the TPC's complaints, David Ivers said: "$20 million is available and in due course we can provide documentary evidence to this effect, subject to transactional documentation." 312 His statement, that the money was available, is as unqualified as Cowley's statement to the same effect made at the Logan Lions media launch the preceding day. It is highly likely, in view of the Ivers' acknowledged suspicions about whether Cowley had indeed arranged finance, that David Ivers did not believe in the truth of this statement. But it is unnecessary to make any particular finding on the point since representations of the kind made to Stokes and Webster will contravene s 52 if they are misleading or deceptive, even though those responsible for making them honestly but erroneously believe in the truth of what was stated. 313 The Logan Lions Limited expression of interest submission to Logan City Council dated 19 November 1993 and signed by David Ivers and the ninth respondent, McLean, was in large part based on Cowley's business plan of June 1993. But it included some new material. Item 2 of the submission is headed "Financial Viability". It directs the reader to "The Vienna Trust Merchant Bank Ltd. offer to finance". The copy of that document dated 9 November 1993 purporting to have been signed by the authorised officer and bearing the corporate seal of Vienna Trust Company Ltd affixed on 12 November 1993 purports to "confirm the availability of Loan funds to a gross US100,000,000" subject to certain conditions. The document describes the loan as structured in "three separate approval drawdown stages" with Stage 1 being for "US$ 20 million (to take effect immediately subject to the conditions herein)". Whether the respondents had funding for the project was of importance to the Council. Despite David Ivers' denial, he, on behalf of IMB, was quite obviously putting this document before Council to show Council that they had the necessary funding in place, albeit funding that required IMB to satisfy the conditions set out in the letter. This was put to the Council long after the directors of IMB, including Glenn Ivers, had become suspicious of Cowley, though it was only at the start of the trial that the respondents acknowledged that Cowley was a fraud and that this letter from the Vienna Trust Merchant Bank produced by Cowley was also fraudulent. 314 Finally, the Commission tendered a media release dated 24 September 1993 which named David Ivers as the person to contact "for more information". The tenor of this release is encapsulated in the opening statement: "The Logan Lions Rugby League Club would go ahead despite action by the Trade Practices Commission last week, which resulted in the sacking of 77 staff." Ivers then wanted to convey to the public the message that the Commission had caused great harm to IMB. The press release does that. The release also contains the following statements: "David Ivers, Managing Director of the Lions' marketing company, the IMB Group, said today that funding was already in place for construction of a multi–million dollar sporting complex in Logan City. 'The project's future has not been affected in any way by proceedings', said Ivers. 'The IFR Group in Melbourne has stated that it is prepared to provide the first $20 million needed for stage one of the project. 'We also have the eighth largest bank in the world, First Assurety Capital Corporation of Idaho in the US, currently finalising a 100% performance bond with IMB's bankers. This means construction work will be able to go ahead as planned.' Ivers said." 315 This release was picked up by the Albert & Logan newspaper. David Ivers does not suggest he took any action to correct what he claimed in evidence was the unauthorised preparation and dissemination of this media release by Nouveau Marketing, an organisation retained by IMB. His denial of involvement in this media release is unconvincing. 316 I accept Stokes' evidence on this issue in preference to that of Glenn Ivers, who conducted the seminar of 16 September 1993 and said he made a qualified statement only about the availability of finance. I accept Webster's evidence also. 317 I accept, on the basis of Stokes' evidence, that a representation within par 30 of the current statement of claim was made on 16 September 1993 by the twelfth respondent in the presence of the fourth respondent on behalf of the first and third respondents at the IMB/Logan Lions sales seminar. I also accept on the basis of Webster's evidence that a similar representation was made in the presence of the fifth respondent at the seminar conducted on 8 September 1993. I further find that the representations were made in order to induce people present at both seminars to purchase Legal & General policies from IMB and that the representations were misleading or deceptive because neither IMB nor Logan Lions had then been able to arrange any finance for the project. The involvement in the contraventions of s 52 of the fourth to tenth and the twelfth respondents 318 I have found that IMB contravened s 52 by representing on 8 and 16 September 1993 that finance had been approved for the first respondent's development. I have also found that between July 1992 and September 1993, IMB contravened s 52 because representations were made on its behalf as to the commencement and completion of the development and as to its attributes and worth on completion. I have further found that in this same period of a little over a year, IMB also contravened s 52 because representations were made on its behalf as to the future value of the shares to be issued in the public company. The Commission contends that orders should be made against all the abovementioned respondents on the basis that each was directly or indirectly knowingly concerned in, or party to, each contravention within s 75B(1)(c) the TPA. 319 The respondents concede, in their closing submissions, that, with the exception of the ninth respondent, each of the abovementioned respondents was employed by the IMB Group and involved in the promotion and marketing of the IMB syndicate concept and the development proposal. I have referred to the evidence which shows that between July 1992 and December 1993, each of the abovementioned respondents, apart from the ninth respondent, was paid each week a salary, fairly modest but not insubstantial, for the duties each performed for IMB. 320 The fifth respondent was a director of IMB and closely involved throughout in promoting its activities, which included participation in the selling of policies. The twelfth respondent, though not an officer of IMB, probably because his bankruptcy prevented that, was, throughout the period, also closely involved in promoting these activities of IMB. The fourth respondent, from the outset, was closely involved in promoting the first respondent's activities, including the sale of its policies. 321 The other respondents, as well as the fourth respondent, were all directors of the third respondent, Logan Lions Limited. The third respondent was incorporated in June 1993 by those controlling the first respondent in order to further the first respondent's scheme. Prior to that, they all took part in promoting or participating in IMB's activities centred on selling policies. Some were more closely and continuously involved than others. That remained the position after incorporation of the third respondent until the end of 1993. The fourth and the sixth to tenth respondents, as directors of the third respondent, caused or at least allowed that company to be associated with the first respondent's promotion of its scheme from June 1993 to the end of that year. Logan Lions was the company held out by the first respondent as that in which the shares the subject of IMB's promotions was to be issued. The issue of those shares was an integral element of IMB's promotional activities. Because of their actions as directors of the third respondent in allowing it to be associated by the first respondent in that way in the first respondent's activities, I consider that each of the third respondent's directors comes within s 75B(1)(c) the TPA in respect of each one of the contraventions I have found that the first respondent engaged in. 322 The ninth respondent differs from the other natural respondents in so far as he alone did not receive any remuneration from IMB. Further, he, like a couple of the other respondents, lost money which he invested in IMB's activities. He suffered by far the largest loss of any of the respondents in this regard. However, though he did not participate in the day–to–day activities of IMB, he played a role in advancing IMB's business. He attended, with other representatives of IMB, the meetings convened by Coopers & Lybrand on 13 November 1991 and by National Mutual on 3 December 1991. He acknowledged that he attended three meetings of the board of IMB or meetings of senior management of IMB to discuss general matters of IMB's business. He took part with senior IMB representatives, including Glenn Ivers, in the interview with Cowley that led to IMB engaging him. His participation in these management activities of IMB is, I think, sufficient to bring him within s 75B(1)(c) in respect of the contraventions I have found against IMB. But his role as a director of Logan Lions is, of itself, sufficient to produce that result. RELIEF TO BE GRANTED 323 The Commission is entitled to declaratory relief in respect of the contraventions in which I have found all the respondents to be involved. 324 Orders are also sought that these respondents disclose to each person who has purchased a National Mutual or a Legal & General policy from IMB and to each person solicited by IMB to buy such a policy information as to the respects in which I have now found those respondents to have engaged in conduct in contravention of s 52 the TPA and also to publish an advertisement containing the same information. 325 I can see no justification for making these disclosure and corrective advertising orders. Policies were sold by IMB to 3,200 people. Many thousands more were unsuccessfully solicited by IMB to invest in such policies. Whether it is now possible for the respondents to comply with the first of these proposed orders is extremely doubtful. I would want to know something about that before contemplating making such an order. In any event, the interest of those who bought policies through IMB in having the opportunity to cancel those policies has long ago been vindicated by the Commission by reason of the action it took against National Mutual and Legal & General and the action those two insurers subsequently agreed to take. 326 The Commission frankly states that it seeks this relief to let all those policyholders who have already supported the Supreme Court action mounted by the Ivers against the Commission, and also those policyholders who might contemplate supporting that action in the future, know that findings adverse to the respondents have been made in these proceedings. I doubt that, to make the orders sought at the behest of the Commission for that purpose, ie, to assist the Commission rather than policyholders, is a proper use of the statutory powers. But the declaratory relief to which I have held the Commission entitled vindicates, to some extent, the Commission's decision to take action against the respondents. 327 The Commission also seeks injunctions restraining the respondents from engaging in the conduct found to have contravened the TPA. Such relief would not, I think, serve any purpose other than to vindicate the public interest in showing that certain of the respondents' conduct contravened s 52 the TPA. In the circumstances of this case, the declaratory relief sought and which I propose to grant will adequately fulfil that purpose. I certify that the preceding three hundred and twenty–seven (327) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond. Associate: Dated: 17 May 2002 Counsel for the Applicant: Mr G Thompson SC Solicitor for the Applicant: Australian Government Solicitor Counsel for the First, Third to Twelfth Respondents: Mr A Vasta QC Dates of Hearing: 7, 8, 9, 14, 15, 16, 17, 22, 23, 24 September and 1 October 1998; 22, 23, 24, 25 February; 1, 2, 3, 4, 8, 9, 10, 11, 24 March; 13, 14, 15, 20, 21, 22, 23, 28 September; 4, 14, 18 October and 10 December 1999 Dates of Written Submissions: 17 December 1999; 24 January and 21 December 2000; 4, 24 April and 17 May 2001 Date of Judgment: 5 April 2002