Industrial Relations Commission of New South Wales in Court Session CITATION : Windjar Pty Limited v Bartercard Limited [2000] NSWIRComm 134 revised - 28/07/2000 APPLICANT Windjar Pty Limited PARTIES : RESPONDENT Bartercard Limited FILE NUMBER: IRC 1514 of 1998 CORAM: Glynn J Unfair contract - franchise agreement - whether concluded contract - executed by applicant - payment for franchise only partially satisfied - not executed by respondent - parties not ad idem as to alleged offer of vendor finance - held: no concluded contract. Unfair contract - franchise agreement - interim licence to operate - held: was "arrangement" in terms of s 105 - that arrangement unfair as lacking specific provisions, particularly as to termination - orders made. CATCHWORDS : Parties - changing corporate applicant for franchise - unrealistic to compartmentalise discussions between natural persons as to negotiations over whole period of such negotiations. Cross claim for $25,000 made on two bases - firstly, alleged misrepresentations by the applicant as to ability to make payments - claim not made out - secondly, as retention of deposit - claim not made out - cross claim rejected. LEGISLATION CITED : Industrial Relations Act 1996 s 105 s 108(b)(c) Cavacuiti v Toyota Motor Corporation Australia Limited (unreported, Marks J, 99/666, 3/12/99) Codelfa Construction Pty Limited v State Rail Authority of NSW (1981-82) 149 CLR 337 Custom Credit Corporation Ltd v Goldsmith 1976 AR 98 Neeta (Epping) Pty Ltd v Phillips (1974-75) 131 CLR 286 CASES CITED : News Limited v Australian Rugby League (1996) 139 ALR 193 Nilda Phillips-Treby v Local Home Service Pty Ltd (unreported, Schmidt J, 97/2956, 11/6/99) [1999] NSW Industrial Commission 265 Production Spray Painting v Newnham (1991) 27 NSWLR 644 Sunbird Plaza Pty Ltd v Mahoney (1988) 166 CLR 245 Walker v Industrial Court of NSW (1994) 53 IR 121 Waltons Stores (Interstate) Ltd v Maher (1987-88) 164 CLR 387 HEARING DATES: 09/27/1999; 09/28/1999; 09/29/1999; 10/12/1999; 10/13/1999 DATE OF JUDGMENT: 07/31/2000 APPLICANT Mr B Bernie of counsel SOLICITORS Mr T Williams Williams-The Law Firm LEGAL REPRESENTATIVES: RESPONDENT Mr C Hodgekiss of counsel SOLICITORS Mr J Castrission Castrission & Co JUDGMENT: - 52 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: GLYNN J 31 JULY 2000 MATTER NO IRC1514 OF 1998 WINDJAR PTY LIMITED v BARTERCARD LIMITED Application under section 106 of the Industrial Relations Act 1996 JUDGMENT 1 By application made pursuant to s 106 of the Industrial Relations Act 1996 (the 1996 Act), Windjar Pty Ltd (Windjar/the applicant/cross respondent) seeks relief against Bartercard Limited (Bartercard/the respondent/cross applicant) by orders, either avoiding, or varying, in whole, or in part, agreements in written form or otherwise in relation to the respondent's Licence/Franchise of the Sydney North area (Sydney North). The applicant contended that the contract and agreements between the applicant and the respondent "became unfair due to misrepresentations statements and material non disclosure of matters concerning the Sydney North franchise - licence grant (sic) or to be granted by the respondent". The applicant also seeks orders for the payment of moneys to reimburse moneys expended by it in relation to Sydney North ($92,678.00) and for loss of profits ($150,000.00), together with interest and costs. 2 Particulars of loss and damage claimed are: Damages: 1. Franchise Fee $25,000.00 2. Capital Expenditure and set up Costs to establish Bartercard Sydney North Franchise $30,224.00 3. Overheads incurred in trading as Bartercard Sydney North Franchise $43,454.00 4. Future profits $150,000.00 5. Income Generated but not paid $ 5,998.00 ___________ TOTAL AMOUNT $254,676.00 ___________ 3 A cross claim, later amended and then further amended without opposition, was filed by the respondent claiming that the applicant had misrepresented its financial position in the negotiations as to the purchase of the Sydney North Brokerage licence, and seeking an order that the cross claimant is entitled to retain the sum of $25,000.00 in respect of expenses incurred by it in relation to Sydney North. (The sum of $25,000.00 had been paid by the applicant as part of the franchise fee.) 4 There was no issue between the parties that the Court had jurisdiction under the 1996 Act in relation to the cross claim as finally amended. 5 In the course of one of the directions hearings prior to the substantive proceedings, the Commission was advised that Bartercard intended to file an offer of compromise. The parties were directed to seek instructions as to the response either wished to make in relation to that revelation. 6 Mr Bernie of counsel on behalf of Windjar later advised that the applicant saw no problem with the proceedings continuing before myself. 7 Ms Glover of counsel at that time appearing for the respondent, advised the Court, that after some consideration, the respondent, having been made fully aware of the consequences, did not object to my hearing the matter. 8 In the substantive proceedings Mr Hodgekiss of counsel appeared with Ms Glover for the respondent. 9 Richard Graham Murton, a director of Windjar Pty Ltd gave evidence on behalf of the applicant. Mr Murton at the relevant times operated a company, Shelly Pty Ltd (Shelly) which traded as Hodgson and Lee. The directors and shareholders of Shelly between 1995 and 1997 were Mr Murton and his wife. 10 Windjar came into existence about July 1996. Mr Murton became a director of that entity on 30 August 1996. 11 Jeffrey John Coy, who was not only the applicant's accountant, but also the accountant for Shelly and for Mr Murton, was called as a witness by the applicant. 12 Evidence, either oral and/or affidavit, was adduced by the respondent from: Brook Adrian Burke (affidavit) (not required for cross-examination), solicitor employed by Bartercard. Michael Gregory Caladine, National Sales manager for Bartercard since 17 July 1995. Affidavit read on basis of no cross-examination, but agreement between counsel that in relation to one item in issue, no Browne v Dunn ( (1894 6 R 67) point would be taken by the respondent against the applicant. Trevor Dietz, executive director of corporate resources, Bartercard. Andrew Federowsky, Managing Director of Bartercard. William Thomas Maddock, General Manager of Administration, Bartercard. Mr Maddock in April 1997 was the Manager of the Credit Department of Bartercard. His responsibilities included assessing and, if applicable, approving lines of credit in Bartercard trade dollars to members of the Bartercard Trading Program. Nicola Jane Marsh, Manager of the Trade Accounts department since April 1998 of Bartercard, but prior to that date an assistant accountant to the Financial Controller of Bartercard. Affidavit. No cross-examination. Unable to travel from Queensland for medical reasons. Paragraphs 5, 6 and 7 of her affidavit admitted over objection. Her affidavit and its attachments related to a Statement purporting to be a reconciliation of income and expenses incurred by Bartercard in relation to its dealings with Windjar and the North Sydney franchise. 13 In relation to the evidence, counsel accepted that if the issues are joined in the oral evidence or in the written material, there would not be a Browne and Dunn point taken. 14 Counsel provided written submissions to the Court. Those submissions were considerably expanded orally. In the interests of (comparative) brevity I set out substantial extracts from the written submissions, with some additions from the oral submissions. All submissions, both oral and written, have, of course, been considered. Submissions - Applicant 15 During April 1996, Mr Rick Murton telephoned Mr Federowsky. Certain negotiations took place in relation to a Bartercard franchise for the suburbs of Northern Sydney (Sydney North) and finally Mr Murton travelled in about April 1996 to the Gold Coast in Queensland, where the respondent's main office in Australia is situated, for further discussions. 16 It was agreed at that first meeting that the purchase price would be $75,000 for the franchise. At all times the applicant's understanding of the agreement with the respondent was that the franchise fee was $75,000 to be paid by the following method: a. Up front deposit $25,000 b. Balance T$50,000 Trade Dollars to be paid over a twelve month period. 17 The applicant came to the above understanding through numerous discussions with the respondent's servants and, in particular, with Mr Andrew Federowsky. 18 The respondent through its servants and agents represented to the Applicant that projected earnings for the franchise would be $150,000 net profit. The applicant relied upon these representations when entering the agreement. 19 At all times the applicant believed it was the franchisee of the respondent and came to that understanding by reason for the following: a. Applicant executed 2 licence agreements and paid deposit of $25,000. b. Through numerous correspondence with the respondent's servants and agents. c. Through the actions and statements made by the respondent's servants and agents. d. Attended invitations by respondents to training and exhibitions. 20 The applicant relied upon the representations made by the respondent's servants and agents and did all things necessary to operate a franchise in the Sydney North area including: a. obtaining a Lease in August 1996 of the premises at Manly for a period of 3 years; b. employing staff to help run the franchise as from January 1997; c. attending training and had staff attend training; d. attending exhibitions; e. purchasing office equipment and other expenses in set up of office; f. incurring overhead expenditure; and g. effectively operating as a franchisee. 21 The agreement between the applicant and respondent became unfair by reason of the respondent's misrepresentations and non material disclosure to the applicant regarding the requirements for granting of a licence and in particular by the failure by the respondent to disclose at the relevant time the exact requirements for obtaining the franchise regarding the issue of security. The respondent through its Managing Director Mr Andrew Federowsky continually misrepresented to the applicant that the issue of security was only a technical one and as a result the applicant relied upon these misrepresentations. 22 The applicant signed an agreement and sent it off as requested, basically that being everything requested of him in a letter dated 19 December, 1996. There is no other correspondence between the applicant and the respondent about what further requirements he should undertake in respect of this matter. 23 The position of the applicant was that a second agreement, sent later, was a concluded agreement and the terms of payment were still being worked out. Although the agreement provided that payment was payable on execution, that did not mean payment straight away and if there is a problem about payment, reasonable time is given to comply and, failing compliance, the agreement may be terminated. That did not occur. 24 A letter dated 8 April 1997 gave the applicant at best three days notice to pay the balance of the moneys. On 9 April 1997, the respondent faxed the applicant requiring all licence fees to be paid within 48 hours. Immediate termination was not appropriate in terms of cl 14 of the agreement. At common law there needs to be a reasonable time to complete (see Neeta (Epping) Pty Ltd v Phillips (Neeta) [(1974-75) 131 CLR 286] ). Under s 106 three days notice would not be a reasonable time to complete and was quite unfair and unconscionable in terms of that section. The applicant suggested a month's notice at least would seem to be a reasonable period. 25 Finally, on 28 April 1997, less than three weeks after the letter dated 8 April 1997, Bartercard cancelled the agreement. The purported termination of the Licence Agreement and the purported appropriation of the applicant's $25,000 deposit were invalid because that was done without just cause. 26 The respondent says that there was no concluded contract between the parties, but see Waltons Stores (Interstate) Ltd v Maher (Waltons) [(1987-88) 164 CLR 387] that in similar circumstances the general principle is that a party cannot estop an agreement. The respondent's behaviour had the effect of leading Mr Murton to believe that an agreement had been reached. 27 Even if there is not a binding contract between the parties that is hardly a matter that prevents relief in this jurisdiction. Under s 105, "contract" means any contract or arrangement or any related condition or any collateral arrangement that does not include an industrial agreement. It was clearly an arrangement, even if there was not a contract, a matter not conceded by the applicant. 28 The applicant seeks findings that the behaviour and the conduct of the respondent towards the applicant in relation to any arrangements between them was unfair and unconscionable within the meaning of s 106 of the Act, and then seeks orders to amend the contract or arrangement and seeks compensation as set out in the summons filed by the applicant in these proceedings. 29 In answer to the respondent's submissions as to the parties to the impugned contract, the applicant referred to sub-ss (b) and (c) of s 108. The applicant relied upon the second licence agreement. That agreement was expressed to be between Bartercard Ltd (the "Licensor") and Windjar Pty Ltd (the "Licensee"). Windjar is a party to the contract. It is a proper applicant. Section 108 would seem to prevent any other party being an applicant in the circumstances that that is the contract the applicant seeks to rely upon. 30 In response to the respondent's submissions as to credit, Mr Murton is a businessman, but not necessarily a man who is used to giving evidence in the witness box. He certainly did the best he could to tell this court the truth. Insofar as there is any conflict of evidence between Mr Murton and Mr Federowsky this Court should prefer the evidence of Mr Murton. There is another reason to do that. There are not a lot of documents and correspondence in this matter, in fact surprisingly little considering the period from May 1996 up to April 1997 over a franchise agreement. Cross Claim - Submissions - Applicant 31 Mr Federowsky said the issue of security for this money was only raised as an issue in about February 1997. Even though according to their own business records, there seem to be conversations that Mr Murton should be able to give security, and indeed that is not surprising on the basis of his application for further security which indicated that he had a substantial net equity in his home, there seems to be in April 1997 for some reason an incredible rush on the part of the respondent to cancel the agreement to sell the Sydney North franchise to the applicant for the sum of $75,000. Only in these proceedings does it start to come out possibly why. Mr Deitz and Mr Federowsky said that later in 1997 they had sold the franchise for $125,000. It was later on sold for $210,000. 32 In the cross claim no reference is made to this. If the gravamen of the cross-claim for damages is alleged misrepresentation, the respondent cannot stop at the expenses; it must go on and say what has happened overall in relation to it. A party cannot claim for expenses if as a result of rescinding the agreement that party has actually made a profit. 33 The cross-claim in the claim for damages is lacking incredibly in terms of supporting documentation, lacking in terms the fact that there is no accountancy evidence from the respondent about the effect of the on-sale for $125,000. Indeed, that is the way they have treated the applicant in these proceedings and it has shown disrespect to the Court, in terms of the orders for discovery, to make a claim like that and not put a fuller list of documents before the Court. These matters should have been in the list of documents. The applicant and the Court are left in the dark about the profit that might have been made on the on-sale and other things that have come out during the course of the proceedings. That assists the applicant because the only way to take Mr Federowsky's evidence on that is that Bartercard made a $40,000 net profit out of the sale. 34 In relation to the cross-claim put against the applicant in these proceedings two lists of documents were filed in the proceedings by the respondent, a list of documents and a supplementary list of documents. In both of them a solicitor certified that according to his instructions they were the only documents that he had relating to the issues pending between the parties in the proceedings. In no list of documents is any reference made to the annexures, specifically the e-mail annexures that are annexed to Mrs Marsh's affidavit. The first time the applicant ever saw these documents was when that affidavit was filed and served on 7 October 1999. It appears from evidence of Mr Federowsky there is a cost centre in his organisation. The applicant was not given any business records, nor any discovery in the course of these proceedings in relation to those costs. 35 No weight can be given to the business records attached to Mrs Marsh's affidavit when they are not backed by discovery or production of any business record whatever nor backed by the calling of evidence in chief of any time spent by the people concerned. Mr Federowsky, in cross examination, conceded that in relation to the two claims which were his claims on which it appeared there was an over-claim, that there had been no apportionment of the airfare or accommodation expenses or dining expenses and indeed no attempt had ever been made to apportion. That was in relation to the only area of that claim that could be tested. Submissions - Respondent 36 In essence this case turns, to a large extent, upon a relatively small factual dispute as between the applicant and the respondent. 37 The respondent says it is true that some time in about 1996 Mr Murton approached the respondent to seek a franchise, for Sydney North. Secondly, it is true, that it was agreed that the fee to be paid was the sum of $75,000. 38 Where the facts begin to diverge as between the applicant and the respondent is as to when those moneys were to be payable. 39 The first offer to purchase the Sydney North Brokerage was communicated by Shelly to the respondent, in or about May 1996. This offer was withdrawn by the respondent in or about December 1996, prior to acceptance by the applicant. 40 The second offer to purchase the Sydney North Brokerage was communicated to the applicant by the respondent on or about 19 December 1996. The second offer to purchase the Sydney North Brokerage was never unequivocally accepted by the applicant. The respondent withdrew the offer to purchase the Sydney North Brokerage licence in or about April 1997 prior to that offer being accepted by the applicant. 41 These offers were made but they were completely not accepted in accordance with their terms so whatever happened was a counter offer and not accepted. Bartercard never executed or signed any agreement. Bartercard's case is that there was never an agreement in accordance with the first and second licence agreement. 42 The respondent agreed to grant the applicant an interim brokerage licence and to permit the applicant to commence business temporarily pending payment of the licence fee. 43 What, in the respondent's submission, this case turns on in law is, if there was in fact an interim licence agreement, which the respondent says there was, what were the terms for its lawful termination and were they given effect to. The respondent submitted that if there was an interim licence as it submitted that the court would be entitled to find that it was subject to termination on terms such as were contained in cl 14 in the previous offers. Termination can occur if there is a breach of the licensee's responsibilities under the agreement, a major responsibility being to pay the licence fee. 44 It may well be put against the respondent that there was some agreement for some deferral of that payment. There is a contest about that. What certainly seems to be common ground is that there could be deferral if adequate security was provided. It was not and that was the end of it. 45 The reason given in the letters of 8 April and 28 April related to the non-payment of the purchase price, i.e. Bartercard trade dollars. 46 There is an additional ground for termination. On the authority of Sunbird Plaza Pty Ltd v Maloney (Sunbird Plaza) [(1988) 166 CLR 245 at 262]: … a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance. 47 If the Court were to find that the respondent was not entitled to terminate the interim licence for the failure to pay or to provide adequate security for the T$50,000, the respondent still submitted that is a lawful termination in that the respondent is entitled to rely upon the breaches of the fourth schedule of the agreement in respect of the condition of the premises and the way in which the interim licence agreement was being conducted. 48 That termination was not unfair in the meaning of the relevant legislation under ss 105 and 106. The letter with three days notice needs to be seen in the context of, for example, Mr Federowsky for a two month period calling Mr Murton two or three times a week asking about the unpaid licence fee. The applicant's submission that what the respondent wanted to do was to chop off Mr Murton and did so with three days notice so that they could resell, is absolutely and completely factually incorrect. Mr Federowsky said that he actually sold that licence at a loss to some ex-employee and only got $30,000 to $40,000. 49 The applicant was supposed to pay the Bartercard dollars initially when the agreement was signed and that did not happen. Much to the credit of Bartercard, they gave him quite a degree of latitude in January, and ultimately up to 28 April to either come up with the Bartercard trade dollars, which never happened, or, secondly, and this is what was happening in March and early April, to be able to provide some security for supposed vendor finance. The respondent was trying to assist with the production of the money which ordinarily should have been paid in January when the agreement was executed. It had asked for the money and waited a reasonable time, and it had behaved in a reasonable way in terms of trying to get it. 50 Given the final alternative to provide security, the evidence of the respondent is that Mr Murton offered inadequate security. Mr Murton says he offered his home. The offering of the home is not consistent with the applicant's credit application, but is very consistent with the denials of Mr Federowsky, Mr Deitz and Mr Maddock that such an offer was made. 51 The applicant said even if there was not a contract, there was an arrangement. The concept of an arrangement under s 105 should be interpreted exactly the same way as one understands "arrangement" under s 45 of the Trade Practices Act. That is not actually a concluded agreement but something where there is a meeting of the minds. 52 An essential part of the respondent's argument is that there was never a meeting of minds as to the terms of a contract or of an arrangement. How could there be said to be a meeting of the minds, how could there be said to be an agreement in terms of who are the parties because the parties chop and change from Shelly to Windjar and it is never ever particularised what were the terms of the arrangement. 53 What in a sense was proposed as the offer by Bartercard was never accepted in a formal sense. 54 If there was an interim licence agreement it is submitted that the Court should find that it contained the termination provisions which were contained in the proposed licence agreement in December 1996. The failure of the applicant to pay the T$50,000 Bartercard dollars was a breach of that agreement and entitled the respondent to immediately terminate the interim licence agreement. 55 Further it is submitted that the interim licence agreement contained an implied term that the applicant would pay the T$50,000 Bartercard dollars within a reasonable time. It is submitted that the applicant had been unable to raise this amount from December 1996 at the latest (see Codelfa Construction Pty Limited v State Rail Authority of New South Wales [(1981-82) 149 CLR 337 at 347]). 56 There was no "unfair contract" in respect of which relief can be sought by the applicant pursuant to s 106 of the Industrial Relations Act. Neither the expressed nor implied termination provisions were unfair in their terms or in the way in which they were exercised (see Walker v Industrial Court of New South Wales [(1994) 53 IR 121]). 57 The respondent's primary submission is that there is no proper evidence of loss or damage. What there is is flawed either legally or factually or both. As to the capital expenditure and set-up costs, the applicant company was not incorporated until 8 July 1996. All the negotiations involved in these potential franchises were conducted until about December between the respondent and between Shelly. The applicant was not a party to these negotiations. The capital expenditure and set-up costs were referred to in Mr Coy's report which was in fact made prior to the incorporation of the applicant. 58 In the alternative, if the Court was to find that there was a franchise licence agreement which could be said to be unfair, the respondent submits that the applicant's claim for damages is flawed for the following reasons: (i) The applicant never paid to the respondent $25,000. By way of a part payment of the licence fee $10,000 of this amount was paid by Mr Kovacic who is not a party to these proceedings. That leaves $15,000 of the applicant's claim. (ii) The applicant by its own conduct forfeited that portion of the licence fee paid to the respondent. (iii) The report prepared by Geoff Coy & Co dated 12 March 1998 regarding the applicant's alleged loss is flawed. The report is based upon instructions given to Mr Coy by Mr Murton. However, there is no evidence in chief from Mr Murton of those instructions, and therefore, there is no factual basis for that report (see TPC v Arnotts (1990) 97 ALR 555) and Munchies Management Pty Ltd v Bellperio (84 ALR 700 at 712-714). (iv) The applicant failed to produce to the Respondent, when called upon to do by a Notice to Produce, any documentary evidence supporting the alleged expenditure and damage claimed. (v) The lease of the Manly Vale premises was signed by Mr Murton personally well before the first agreement had even been sent to him. If there is any loss there it must be some pre-contractual expenditure for which the respondent could never be liable. He was taking his own risk if he wanted to enter into a lease before he formalised the relationship. 59 With respect to any representation as to future profits, one has quite frankly a direct contest between Mr Federowsky who said he did not say $150,000 and Mr Murton who said he did. Where there are these conflicts the evidence of Mr Federowsky should be preferred to the evidence of Mr Murton. But even if the Court said such a representation was made, it was the respondent's submission that any such representation, which it denied being made, was not relied upon as was shown by the letter of 28 October 1996. Submissions - Respondent - Cross-Claim 60 The respondent rescinded the agreement to grant the interim licence for the Sydney North Brokerage in or about April 1997 due to the failure by the applicant to pay the licence fee in accordance with the agreement. Accordingly, it is submitted that the interim licence was lawfully terminated by the respondent and therefore the applicant cannot make a claim for any loss or damage. However, the respondent is entitled to claim loss or damage as set out in the cross claim. 61 The respondent's case is that the applicant, through Mr Murton, and then through one of his business partners, kept on making assurances that the actual moneys, the T$50,000, will be paid. They were not. 62 In the course of negotiations a number of representations were made by the applicant. Those representations were misleading and that caused at least the entry into an unfair contract under s 105, which is the interim licence referred to and the expenditure of moneys which happened. That is one way in which the case is put, relying upon a line of authority as set out by Schmidt J on 11 June 1999 in Nilda Phillips - Treby v Local Home Services Pty Ltd [unreported, (1999) New South Wales Industrial Commission 265] which enables a party in a s 106 claim and including, the respondent submitted no doubt a s 106 cross-claim, to rely upon false or misleading representations. 63 The respondent submits that it is entitled to retain the $25,000 under s 106 grounds of the cross-claim or, alternatively, it is entitled to retain the money that has been paid as a forfeited deposit, if, of course, there was some form of contract or some understanding, some arrangement as is referred to under s 105 of the Industrial Relations Act, as part of its compensation for the damages it has sustained. 64 The respondent submits that the respondent is entitled to be reimbursed firstly, in relation to the applicant's indebtedness to the respondent, that is the amount owed to the respondent by the applicant for the trading account ($10,184.53), the scrip account ($5,054.00) and Mr Kovacic's account ($2,938.14). 65 Secondly, the respondent is entitled to be reimbursed for its costs and expenses incurred and thrown away in relation to its dealings with the applicant in connection with the Sydney North Brokerage by reason of the respondent's reliance upon the applicant's continual representations that the applicant had sufficient funds and sufficient security to pay the franchise license fee. 66 The applicant says that in a sense the respondent was put on notice of problems about needing time to pay as early as October 1996. The respondent was put on notice, not by the applicant, but by Hodgson & Lee, a division of Shelly, in a letter signed by Mr Murton. The applicant was in existence at that time, having been incorporated in July 1996. 67 There was not a letter from Windjar saying it needed time to pay. Windjar's representation was the reverse. It, through Mr Murton, signed two licence agreements, the first one in about December 1996 and the second one in January. The second schedule contains the clearest representation of all, signed by Mr Murton, acknowledging that there would be the payment of the $25,000 and the T$50,000 on execution. 68 Windjar Pty Ltd could not make the complete payment. There seemed to be some later agreement as to the payment of $7,500, being 10 per cent as a deposit. Then later there was the payment of the full deposit though $10,000 of that deposit is incapable of being claimed by the applicant in these proceedings because that is money that was paid by Mr Kovacic, who is not a party and was never heard from and there is no proper reason for that situation. 69 It is agreed that there were discussions as to the security for the T$50,000. The security that was offered was examined by the respondent's officers and found to be inadequate. In the end, the respondent had got to the situation where there was no question of fulfilment of one of the essential conditions of the offer, that is the payment of T$50,000, and it thereafter, in a sense, took away the offer that had never been accepted, because acceptance would have been unequivocal and unconditional. It never was. 70 In matters under s 106(2) the Commission can look at the conduct of the parties. That presumably must mean parties to the very proceedings which are before the Court and who are they? They are Windjar and Bartercard, not Mr Murton, not Mr Kovacic and not Shelly. That becomes important in terms of damages (see News Limited v Australian Rugby League (1996) 139 ALR 193 at 297ff). 71 As to the subsequent resale of the brokerage sometime shortly after April 1997, there was a sale of $30,000 to $40,000 and not for the $75,000. There was actually a loss so a loss should be claimed. 72 In relation to the cross-claim the applicant had conceded that there was no dispute in relation to those business records being exhibit 29, the amounts of money in the Bartercard accounts and the trading account and the scrip account. The respondent did accept that the time records appear to be lacking as Mr Federowsky frankly acknowledged. There may well be good reasons for discounting part of the cross-claim but only in relation to the time that was spent and maybe a lack of apportionment. Submissions - Applicant - In reply 73 In relation to Mr Coy's report, Mr Murton, in par 21 of his affidavit, adopted that report. Certainly there is far more adoption of the factual basis of Mr Coy's report than any factual adoption of Mrs Marsh's report by any of the witnesses. 74 The respondent says money is payable upon execution. As the respondent did not execute the agreement the problem for it comes that until it executed the agreement the balance of the moneys was not payable. 75 The respondent also claimed that it had the right to keep the deposit moneys. The respondent has two problems in that claim. In contract law moneys are not payable until there is a binding contract, and the respondent says there was not a binding contract. Furthermore, there has to be a deposit stipulated in that binding contract. There is no stipulated deposit in this case. The closest that it comes to a stipulated deposit is in the oral agreement between Mr Federowsky and Mr Murton when the respondent says just send ten per cent, at that stage $7,500, but there is no written stipulation as to a deposit. 76 The cross-claim as to the $18,000 overdraft is disputed, for instance, there seems to be an amount claimed against Mr Kovacic personally, $2,000, which is actually Mr Kovacic's trading account. Consideration 77 The application is brought pursuant to ss 105 and 106 of the 1996 Act. Those sections provide as follows: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. Note. The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session. Division 2 Unfair contracts may be declared void or varied 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. 78 Reliance was also placed on s 108 by the respondent, and the relevant provisions are set out below: An order may be made under this Division on the application of: any party to the contract, or any person who, but for the making of such an order, would be a party to the contract, or … 79 As described in the second Agreement signed in January 1997 by the applicant, Bartercard Ltd is a company that acts as a clearing house and third party record keeper of trade transactions amongst its members and directs its members to each other for the purpose of trade. It has a membership agreement with its members and its members trade in the trading program in accordance with the terms and conditions set out in the "Trading Rules". It intends to operate a reciprocal trade exchange program, the Bartercard Trading Program, in all States and Territories in Australia and has the exclusive rights to market and promote the Bartercard Trading Program throughout Australia. Bartercard has the right to grant a licence to suitably qualified brokers for the purpose of enrolling independent businesses in the Bartercard Trading Program; and providing and facilitating trade in the licensed area on a commission basis. Bartercard grants the relevant Licence and the Licensee agrees to accept that licence, in consideration of the payment of such amounts of money and in the manner and form as set out in, and on the terms and conditions contained in its standard Agreement. 80 It was Mr Murton who first approached the respondent, not the other way around. Hodgson and Lee did business with Bartercard as a trader from July 1994 to 1997 by selling plumbing services and purchasing goods by Bartercard. As of November 1995, Mr Murton was expressing personal interest in becoming a Bartercard franchisee. The franchise licence price was at that time, $75,000. By January 1997 the going price was $125,000. Bartercard, during the course of the negotiations being examined, had about 15 franchisees. In October 1999, Bartercard had over 30 offices in Australia, seven being company owned, the rest franchisees. 81 In this case, the first issue to be decided is whether in fact there exists a contract or arrangement between the parties. 82 It is common ground that it was agreed at the first meeting between the applicant and Mr Federowsky in April 1996 that the purchase price for the franchise would be $75,000. It is also common ground that the elements making up that $75,000 later changed by agreement in December 1996 to $25,000 in Australian dollars in combination with T$50,000 in Bartercard trade dollars. 83 In the time between April and December 1996, when the applicant returned the first agreement, a number of events had occurred. 84 By letter dated 27 May 1996, Mr Murton, as Managing Director of Shelly, registered his intent, on behalf of Shelly Pty Ltd trading as Hodgson and Lee, to purchase the Northside (sic) Sydney Brokerage of Bartercard Ltd. He went on to say: The purchase price of $75,000.00 is agreed to and it is our intent to take up offer by 1 August 1996. All other paperwork including the franchise agreement which detailed exclusive marketing territory have been read and understood and form unconditionally part of this letter of intent. 85 Windjar Pty Ltd was incorporated on 8 July 1996. 86 The offer was not taken up by Shelly prior to the 1 August 1996 date nominated by Mr Murton. 87 Mr Murton took on the lease of premises at Condamine Street, Manly Vale out of which to operate the Sydney North franchise on 21 August 1996. He said that was done on instructions from Mr Federowsky. Mr Murton said in relation to the selection of the Manly Vale premises there had been "numerous discussions, probably twenty phone calls detailing what the requirements were". Mr Federowsky had given him quite specific requirements: it would be in a commercial area, be on a main street, be sixty to eighty square metres, have two interview office rooms preferably with class. Mr Murton had provided four or five alternatives to Mr Federowsky to 1 Condamine Street and said he had even received instructions to sign that particular lease. 88 Mr Federowsky said that the applicant had advised him that the applicant already had the premises and equipment e.g. faxes, phones, but Mr Federowsky did not know if a lease had been entered into at that time. He had discussed with the applicant the suitability of the offices, but not alternative areas because the applicant had already picked the premises. 89 I think it very likely that Mr Murton did discuss particular properties with Mr Federowsky in August 1996. The premises he leased so fitted Bartercard's precise requirements, that I do not think he could have come to a decision unassisted. However, that does not of itself mean that Mr Federowsky "instructed" Mr Murton to lease those premises, and I do not find that to be the case, though he may have made some general approbation of a decision actually made by Mr Murton. 90 The affidavit evidence of Trevor Dietz was that it was Bartercard's usual practice that the person in Bartercard who had made the initial contact with the prospective franchisee would conduct the negotiation and sale of the franchise. In this case, Mr Federowsky had been the person initially contacted by Mr Murton. 91 I accept that there was continuous communication between Mr Murton and Mr Federowsky after May and those communications were concerned, amongst other matters, with payment of the franchise fee. The issue of payment was specifically dealt with in a letter dated 28 October 1996 (the October letter) in which Mr Murton as Managing Director, apologised to Bartercard, on the letterhead of Hodgson & Lee, a Division of Shelly Pty Ltd, for the delay in the completion of the Franchise Agreement for Sydney North. He went on to say that: Whilst I have an office at Balgowlah in place fully equipped with phones, faxes, desks etc, staff both co-ordinators and sales ready, my financial backer has been reluctant to advance the necessary funds for payment of the $75,000 Franchise Fee. Of particular concern to them are:- (1) The ineffective performance of the Sydney South West Brokerage and the current sale. (2) the financial difficulty of the Central Coast Brokerage. (3) The lack of a clear marketing plan for increasing Bartercard [sic] penetration in the Sydney area. I am very anxious to complete the execution of the license agreement and propose the following - (1) Immediate cash payment of $37,000 (50%) and the balance (secured) in 12 Months October 1997. (2) Immediate cash payment of $37,000 (50%) and the balance of $37,000 in trade dollars from Hodgson & Lee (3) Immediate cash payment of $20,000 and $5,000 per month on the 1st of each month last payment 1st November, 1997. Andrew I have 20 clients ready to sign up from my existing contacts. I know that will generate some cash flow which will be needed to fund advertising etc. I look forward to your favourable consideration of my proposal. 92 Mr Murton was cross examined about that letter. 93 According to Mr Murton the October letter had been written by him at the suggestion of Mr Federowsky, after numerous phone discussions. Mr Murton said that the purpose of those phone calls was, on Mr Federowsky's part, his offer to partly finance the franchise fee. He had directed Mr Murton to put something in writing so that he could go to his Board of Directors, so that an offer of part vendor finance could be substantiated. 94 Nothing had come of the proposals in that letter. 95 Mr Murton said that sometime before signing the first agreement in early December he had advised Bartercard that the proposed franchisee was Windjar not Shelly. 96 The first licence agreement was executed by the applicant on 6 December 1996, and returned to Bartercard about a month later. That agreement was made between Bartercard Ltd and Winjar [sic] Pty Ltd. Originally in Item 1 of the Second Schedule (Payments) it provided that the Licence payments will consist [sic] the following: Item 1. Seventy five thousand ($75,000.00) in Australian dollars, payable on the execution of the herein enclosed agreement entitled "Licence Agreement …" 97 That $75,000 was broken down as follows: A fee in consideration of the grant of Licence $ 55,000.00 The cost of providing the initial merchandising kit as detailed hereunder 20,000.00 AMOUNT PAYABLE $ 75,000.00 98 The word "seventy" and the figures "($75,000)" were deleted, and the following handwritten substitution made: Item 1 twenty five thousand ($25,000) in Australian dollars, ($50,000) Fifty thousand Bartercard Trade Dollars, payable etc. 99 The changes had been initialled by Mr Murton and by Mr Ivan Kovacic. Mr Kovacic was an original director and shareholder of Windjar. He did not put any moneys into Windjar. 100 In relation to those handwritten changes, Mr Murton said that at the time of the execution by the applicant of the first agreement in December 1996, the price was $75,000 with no vendor finance. At that time, the break up of A$25,000/T$50,000 had not been offered. He had been instructed by Mr Federowsky in the course of a 20 minute telephone conversation to send 10%, hence the cheque for $7,500 which accompanied the first agreement. In that same 20 minute telephone conversation, other matters discussed included what was planned for the franchise, what was the next 6 months as far as marketing went and the fact that the lease had been established. 101 Mr Federowsky recalled the agreement that resulted in that substitution being made, but could not recall the conversation or the date of it. 102 The second agreement was made necessary because the first agreement sent to the applicant did not contain the guarantee clauses. 103 The second agreement was made between Bartercard Ltd and Windjar Pty Ltd. According to the Second Schedule (Payments), the Licence payments will consist [sic] the following: Twenty Five Thousand Dollars ($25,000) in Australian dollars and Fifty Thousand Bartercard Trade Dollars (T$50,000.00) payable on the execution of the herein enclosed agreement entitled "Licence Agreement and consisting of: Licence Fee Payment $ 55,000.00 Computer Equipment, Merchandising Kit and Training $ 20,000.00 $ 75,000.00 104 Mr Murton said that the second licence agreement, which had been executed by the applicant on 6 January 1997, was not returned to the respondent for about four weeks. During that four weeks he had had discussions with Mr Federowsky "along the lines of there would be payment over 12 months of the T$50,000 trade component vendor finance". 105 Mr Murton explained the payments made as being cheques for $7,500 (sent about 17 December 1996) and $17,500 (sent about 7 February 1997), with the return of the second agreement, together with two vouchers of T$25,000 each of Bartercard trade dollars, the vouchers being sent on the instructions of Mr Federowsky and on the basis Bartercard was offering unsecured increases for both vouchers. One voucher was in the name of Hodgson and Lee, the second in the name of V Kovacic. Mr Murton also said that as far as he was aware his voucher, at least was to be honoured by an application for an increase in trade dollars to cover the T$25,000 voucher which he tendered to Bartercard. 106 Mr Murton understood that the intention was that the provision of the two vouchers and the payment of money satisfied the execution of the second agreement. 107 Mr Murton knew that at the time he drew his voucher for T$25,000 trade dollars in early February 1997 that he did not have funds in the Hodgson & Lee account to cover that amount. I made no adverse inference against the applicant in the drawing by Mr Murton of that voucher. His actions were in conformity both with his belief that vendor finance was on offer and also of the nature of the account itself. He said that the account was a revolving line of credit which went up and down and could have had T$25,000 in it at any one time. Four weeks later he became aware that Mr Kovacic, who had drawn the second voucher for T$25,000, also did not have sufficient funds in his account to cover that voucher. 108 Mr Federowsky said that in conversations with Mr Murton in early 1997 he had initially not raised as an issue the fact that he would require security for the T$50,000 trade dollars, because Valentino [Kovacic] was supposed to be able to raise his T$25,000 and through Hodgson & Lee Mr Murton was able to raise his T$25,000. The topic of security was first raised by him in discussions with Mr Murton in February or March 1997 after it became apparent that Mr Murton needed to go for an overdraft facility of Bartercard trade dollars to effect payment for the licence, rather than having the funds available as he had initially stated. One of the suggestions Mr Federowsky made to Mr Murton was that he put in an application for further trade dollars through Hodgson & Lee "and it will be paid for that way, or words to that effect". 109 Mr Murton said that the question from Mr Federowsky in February and March 1997 was not "where was the money", as was put to him by counsel for the respondent, but what form of security Mr Murton could offer. Mr Murton said that he had not been made aware that there was any security required when he had sent the two vouchers for T$50,000 plus the balance of the deposit. He did recall in February/March 1997 Mr Federowsky saying to him, "Rick, we need to finalise the payments for the brokerage. If you can't pay we will be forced to retract our offer for the brokerage. The purchase price of similar brokerage is now $125,000 and you are getting a good deal but we must receive payment". 110 Mr Murton agreed that during February and March 1997 Mr Federowsky had said, barring the three words emphasised below, words to the effect "Rick, if you are able to offer adequate security we may be able to grant you a credit facility in trade dollars which will be repayable once you become the broker". Mr Murton agreed that he had answered "Yes, I will be able to provide you with security". 111 Those answers did not sit with another of Mr Murton's answers that he was the one offering security after that and that there was no specific requirement asked of him to offer security for the T$50,000. According to him, "this security problem came up after the agreement was executed and consented to [by] Bartercard". He said it was "a focal point" raised by Mr Federowsky but one Mr Murton himself was anxious to settle. 112 A particular problem that arises in the consideration of the differences in evidence, particularly those in the evidence of Mr Murton and Mr Federowsky, arises from the lack of documentation. The respondent conceded that it was correct that there were very few documents in the period May 1996 to April 1997 coming from Bartercard, but pointed to abundant uncontested evidence, that there had been numerous telephone discussions. 113 In the absence of documentation, or agreed evidence, the Court must therefore look to the actions of all the persons actually involved in the overall transaction. 114 On the evidence of both Mr Murton and of Mr Federowsky there had been extensive communication by telephone over the entire period that the applicant and the respondent were involved with each other. Mr Murton said he had spoken to Mr Federowsky on six occasions in April 1996 and he had "numerous discussions on the phone" prior to Mr Murton writing the 28 October 1996 letter. Before September, there had been "numerous discussions, probably twenty phone calls detailing what the requirements" were for the premises to be leased. 115 The changes to the terms of the first contract, e.g. from $75,000 to a mixture of Australian/Bartercard Trade dollars, were agreed during telephone calls between those two gentlemen. That agreement was noted on the relevant documents by Mr Murton. The fact that Bartercard did not dispute those written changes and the arrangement for a 10% deposit, which was not documented, allows the Court to accept that the parties were ad idem as to those changes. 116 However, there is nothing to document Mr Murton's further claim that Mr Federowsky had proposed that the T$50,000 would be vendor finance, paid for over a period of 12 months. That proposal of vendor finance was not reflected in the hand written amendments Mr Murton had made to the first agreement, and which had been carried over into the second agreement. Mr Murton said that the agreement for repayment of the vouchers over twelve months was one outside the second licence agreement. He accepted that that voucher repayment agreement was not evidenced anywhere. 117 Mr Federowsky denied proposing any such arrangement. He said that agreement on the break up of the franchise fee had been reached in November 1996. He denied, amongst other things, that it had been agreed then or on 7 February 1997 that the franchise fee was to be unsecured and repaid over a twelve month period by use of trade dollars. 118 A claim by Mr Murton in evidence that that agreement was reached on 7 February 1997, if that claim went to the break up of the franchise fee, is manifestly incorrect, as reference to the alterations on the first agreement, returned to Bartercard by Mr Murton in January 1997 shows. 119 On 3 April 1997 Shelly sought from Bartercard that its credit limit be increased from T$15,000 to T$40,000 for a period of 12 months. Mr Murton said that Shelly Pty Ltd trading as Hodgson & Lee did not have cash flow difficulties in March/April 1997. He said that Mr Federowsky had told him to put the application in as being the simplest way to achieve the T$25,000 credit. Shelly itself did not have T$25,000. The purpose of seeking the increase to T$40,000 was to provide a means of paying for some of the T$50,000 Bartercard trade dollars which were part of the franchise fee. The security offered by Shelly was a Bill of Sale over a truck and a Deed of Assignment charge over Shelly valued at $45,000. Mr Murton said he had also offered Mr Maddock a second mortgage over his personal property, that being a house. 120 Bartercard had rejected the truck as being of insufficient value, and the security over Shelly because the National Bank of Australia (NAB) already had a charge over it. No further information was sought by Bartercard as to the proposal of a second mortgage over his house. 121 The claim that Mr Murton had offered his house as security was denied by Mr Dietz, Mr Maddock and Mr Federowsky. Mr Maddock had seen on the file a reference to Mr Murton having an unencumbered property which Mr Murton claimed to be worth $400,000, but said that he had never been advised by Trevor Dietz that Mr Murton had offered a mortgage over his house. All three agreed that if it had been offered Bartercard would normally have accepted it, subject to the house having some substantial value. Mr Federowsky said that Bartercard's approach to acceptable security was very similar to that of banks i.e. real estate was one basis. 122 In early April 1997, at the request of Trevor Dietz, Mr Maddock checked if there was any security that could be provided by Windjar to secure a credit facility for the amount of the trade dollar component of the licence fee. He said Windjar could not do so because it had no assets. 123 Mr Dietz said that the non payment of the franchise fee for Sydney North became an issue that was regularly discussed at senior management meetings of Bartercard. Following a resolution by senior management, Mr Federowsky, on 8 April 1997 had written to Mr Murton [not Windjar] advising him as follows: Dear Rick, We refer to the considerable delays in finalising the Brokerage Licence Agreement and the payment of the Licence Fees for Sydney North. We have no option other than to insist that if the remaining monies owing are not paid by close of business on Friday, 11 April 1997 that we will be forced to rescind our offer for the Brokerage Licence area known as Sydney North. Your urgent attention to this matter is requested. 124 Mr Dietz said that prior to the letter of 8 April 1997 having been sent to Mr Murton there had been several discussions over many weeks trying to get security in place to effect the sale of the brokerage, but every possibility had been exhausted. 125 Mr Federowsky accepted that the above letter was the first written notice in the period 19 December 1996 to 8 April 1997 to Mr Murton that unless the applicant came up with adequate security within a certain period of time Bartercard would have to terminate the agreement. 126 The letter of 8 April 1997 refers to Bartercard's "offer for the Brokerage license area known as Sydney North". The letter made no reference to any interim license or agreement. 127 Mr Federowsky denied that he had told Mr Murton on 1 May 1996 that he could expect to earn approximately $150,000 per annum from a franchise such as Sydney North. He said that Bartercard does not make statements about profitability because it does not control franchisees' overheads, fixed expenses or staff levels. Suggestions can be made about earnings on sales performance, and Bartercard does look at every franchisee's current performance. Suggestions as to earnings were that if a franchisee made ten sales with a commission of $450, that franchisee made $4,500. 128 It does not seem to me that the applicant through Mr Murton did rely on representations, even if made, as they would have been in May 1996, to Shelly, by the respondent as to profits of $150,000 per annum. The October letter made specific reference to perceived problems with two brokerages, suggesting that Mr Murton was pursuing his own investigations. 129 In my view, a review of all the evidence would indicate that reference to profits would more likely to have been along the lines stated by Mr Federowsky in the course of the respondent's established procedure for discussions with prospective franchisees. 130 The view that Mr Murton was inclined to adopt, and the one he continually put forward to Bartercard, and Mr Federowsky in particular, was one enhanced by rose coloured glasses. For instance, he said that as at 28 October 1996, he had already employed staff, opened bank accounts and had organised the requisite stationery headed "Windjar Franchisee for Bartercard Sydney North", that letterhead based on the bromides with a distinctive logo supplied by Bartercard head office. 131 However, cross examined as to the October letter, he said that as at 28 October 1996 he was the only staff member on a full time basis, though Mr Kovacic was also there. The term "sales ready" meant "sales to be made". Although he had said in that letter that he had 20 clients ready to sign up none were signed up before January 1997. Operations did not begin until January. In January another person was hired. He believed that between January to April 1997 some thirty sales were made. 132 Mr Murton said that in entering into the lease at Manly Vale and in making the expenditure in setting up the office, he was relying upon the undertaking of Mr Federowsky from May 1996 when the latter told Mr Murton he was the licensee and that Mr Murton was to prepare for becoming a licensee. Mr Murton was asked to point out where he had recorded in his affidavit the undertakings by Mr Federowsky that he had relied upon. He responded by reference to paragraphs 6 and 8 of his first affidavit, but in no way could the contents of those paragraphs be construed as relating to "undertakings". 133 In May 1996 Mr Murton said Mr Federowsky had specifically said to him during that visit "you are approved as a broker for Sydney North", "please start preparing for franchise", and "we have done checks on you". He did not recall the further words Mr Federowsky claimed to have said as to payment of the licence fee and [to] complete the licence agreement. He had assumed that the agreement would be sent to him at some time. However, I would understand the words he did remember, and, in particular, "please start preparing for franchise" would refer to the moving forward to complete the formal documentation. Moreover, it seems to me that his later actions were based on a similar understanding, for instance, on 27 May 1996 he had forwarded a letter as to Shelly's intent to take up Bartercard's offer by 1 August 1996. 134 Mr Murton's recollection was not always accurate. He said that in December, before the first licence was signed, that Mr Federowsky had advised him that he was getting a better offer, that being $25,000 cash, and T$50,000 funding from Mr Federowsky. However, he shortly after conceded that as at 6 December 1996, the date of signature, he had not had a discussion with Mr Federowsky as to that funding break up. 135 Mr Murton accepted that Mr Federowsky had not advised him on the selection of sales consultant or of the computer system. (Different evidence as to the latter matter from the respondent appeared to relate to the post February 1997 period.) 136 The progress of finalising the Sydney North franchise may have been the concern of Bartercard's senior management, as was submitted by the respondent, but conveying that concern to Mr Murton appears to have been, in the main, the responsibility of Mr Federowsky. As already noted, most of the communication between those two gentlemen appears to have taken place by telephone. 137 Notes of internal discussions on 15 April 1997, relating to an update on brokerages and in particular that of Sydney North, state that "Rick Murton has paid and given adequate security but Valentino [Kovacic] has been unable to meet his obligation. Offer of the Brokerage area should be withdrawn immediately". Taken to those notes, Mr Federowsky denied that he had indicated to Mr Murton earlier in the year, that the security problem was one he need not be too troubled with because it would be worked out. He was aware that the security offered by Mr Murton was not of sufficient value to justify the line of credit sought. Those notes had been taken by a secretary in the context of a meeting in which much talking was occurring. He said that "The first sentence did not really go with the second one". 138 Even if Mr Federowsky had advised Mr Murton as was claimed by Mr Murton, that the matter of security was only a technical point, or used similar words, I do not think that the evidence sustains an inference that by the use of such a term, Mr Federowsky thought it an unimportant point. On my reading of the evidence Mr Federowsky, if anything, was referring to the form of the security, not to the provision of the security itself. 139 By December 1996 Windjar had become the applicant for the franchise not Shelly, as was shown in the first licence agreement returned in December 1996. There seems to have been a seamless acceptance by Bartercard of Windjar in substitution for Shelly, once Shelly had been ruled out from being an acceptable applicant for the licence. 140 I do not think that, insofar as information flowed between Mr Murton, Shelly, Windjar, Mr Federowsky and Bartercard, during the whole period 1996 and 1997, that such information can be compartmentalised as sought by the respondent in its reliance upon s 108 of the 1996 Act. Mr Murton was the person who was the common communicator for Shelly and Windjar in the negotiations between those entities and Bartercard. It would be, in my view, quite unreal to try to confine attention to his participation and to Bartercard's actions only from the time Windjar was incorporated in July 1996 or from the time Windjar specifically first came into the negotiations with Bartercard sometime in November 1996. 141 Mr Murton made the handwritten amendments to the first agreement to reflect a $25,000/T$50,000 break up of the payment, which amendments were picked up in the second agreement, but he added no note as to any payment period. There is no reference in either the first or the second licence agreements that the T$50,000 Bartercard trade dollars are to be payable over a 12 month period. 142 As I understand his evidence, Mr Murton's understanding of the agreement he had with Bartercard as at 7 February 1997, after many telephone calls, was that he had accepted Mr Federowsky's offer (an offer denied by Mr Federowsky) that Mr Murton could pay off the Bartercard trade dollars component of the license fee agreement over 12 months. 143 However, it does not seem that Mr Murton protested when advised that security was necessary in relation to that Bartercard trade dollars component of the license fee agreement, that that was not in accordance with the agreement he had made. Mr Murton was certainly under no illusion very soon after 7 February 1997 that Bartercard accepted his position in these proceedings which was that vendor finance was on offer in relation to the Bartercard trade dollars. He was still attempting to work out security acceptable to the respondent even after the 8 April letter. 144 The amount of $25,000 was paid. As at the date when Bartercard withdrew its offer, which was around the third week of April 1997, no payment had been made of any part of the T$50,000 Bartercard trade dollar component. 145 The respondent had not executed either the first agreement executed by the applicant in December 1996 nor the second agreement executed by the applicant in January 1997. 146 If one accepts the evidence of Mr Murton that the Bartercard Trade dollars to the amount of T$50,000 were payable over a period of 12 months, as a form of vendor finance, then there was a concluded contract. 147 If one accepts the evidence of Mr Federowsky, that Bartercard required security to be provided by the applicant in respect of T$50,000 before the purchase of the licence was finalised, then there was no concluded contract. 148 The payment for the Sydney North brokerage, sought by Bartercard through Mr Federowsky, totalled, at all times, $75,000. The elements making up that $75,000 changed during the course of negotiations, from $75,000 Australian dollars to a break up of $25,000 Australian dollars plus T$50,000 Bartercard trade dollars. 149 The parties are ad idem on that point. 150 However, I find that at all times, in relation to the payment of the T$50,000 Bartercard trade dollars by the applicant, Bartercard was offering that term subject to security acceptable to it for that amount being provided by the applicant. 151 I find that the applicant's understanding, at least from mid-December 1996 until 7 February 1997, was that the amount of T$50,000 was to be the subject of unsecured vendor finance. 152 It is clear, in my view, that it had never been the intention of Bartercard to provide unsecured vendor finance to the applicant. 153 I do not find that Waltons assists the applicant. There was constant communication between Mr Murton and Bartercard, in particular with Mr Federowsky. While there were deficiencies in that communication, I do not think that Mr Federowsky at any time left Mr Murton with any belief that Mr Federowsky knew to be mistaken. 154 I find that as at 7 February there was no concluded contract between the applicant and the respondent. 155 I find that the second licence agreement between Windjar and Bartercard was not a concluded contract. 156 That finding, however, does not finalise this application made pursuant to s 106. A "contract" under s 105, and consequently under s 106, "means any contract or arrangement, or any related condition or collateral arrangement…". 157 The next task I have to embark on is that described by the Commission in Court Session in Custom Credit Corporation Ltd V Goldsmith [1976 AR 98 at 131]: Against the background of all that we have said we turn to the relevant facts of the cases before us, and the immediate question is: Was there an "arrangement" within the meaning of s. 88F?, a question confined, of course, to the first part of the section - "any contract or arrangement" - because we are dealing here only with the sixth submission. In seeking the answer to this question we see our duty as being to ascertain what was the true arrangement, if any, which existed between relevant parties; to ascertain what were the realities between the parties as distinct from mere forms, and notwithstanding any cloak with which the parties, by explanatory statements, sought to clothe their dealings. Fulfilment of this duty, as we see it, involves finding out whether there was any understanding made or plan arranged between parties or any concerted action by them pursuant to or by which they arranged their affairs for a particular purpose or so as to produce a particular effect or result. It is abundantly clear that there was no one document specifying any such arrangement; but, on that account, resort may be had to oral evidence of discussions and conduct, and we are free to examine the actual relationship between parties and to regard this as manifestation of an arrangement: Barham's Case [(1975) 1 NSWLR at 35]. Interim Agreement 158 The applicant rejected the respondent's contention that there had been an interim agreement for the applicant to act as a Bartercard franchisee. However, it submitted that, even on the respondent's own position there must have been at the very least an interim contract or arrangement, which gives this Court jurisdiction and the Court can find that in fact the way it has operated is unfair and make orders accordingly. 159 In Cavacuiti v Toyota Motor Corporation Australia Limited (unreported; Marks J; 99/666; 3/12/99), Marks J had occasion to consider the meaning of "arrangement" and stated: The meaning of "arrangement" in the context of the predecessor to s106 of the Act has been considered in a number of decided cases. They are collected and referred to in the judgment of Cahill Dep CJ in the Full Court of the Industrial Relations Court of New South Wales in State Bank of New South Wales Ltd v Grover (1996) 64 IR 451 commencing at 456. Although his Honour was ultimately in dissent in that case, his Honour's dissent did not extend to this issue. The authorities referred to in his Honour's judgment indicate that an arrangement exists where there is an understanding reached between parties to undertake some planned activity or conduct or where parties so arrange activities or conduct themselves for a particular purpose in order to bring about a particular result. … It is next necessary to determine whether there was an arrangement whereby a person performed work in an industry. 160 Marks J then moved on to consider whether the arrangement he had described was one whereby a person performs work in an industry. He referred in some detail to the judgment in the New South Wales Court of Appeal in Production Spray Painting v Newnham [(1991) 27 NSWLR 644]. For the purposes of this judgment, I refer only to the approach of Mahoney JA at 649-650: In my opinion the section looks to the purpose of the transaction itself and to whether the purpose of the transaction was that relevant work be performed. In the terms of the section, it is the transaction, that is, the "contract or arrangement or …"that is to be the cause of ("whereby") the work being performed. This suggests, I think, that what is in question is not merely an accidental consequence of the transaction but that which was its purpose to bring about. If this be so, then, in my opinion, the purpose must be that of both of the parties. If, for example, X a car dealer sells Y a motor vehicle, it may be the purpose of Y that it be used as a taxi cab and so that a person be employed to drive it in the transport industry. Y's purpose in buying the car was that such work be done and in that sense the performance of the work was a consequence of the sale of the car. But, in my opinion, it is not to that kind of transaction that the section is directed. It is the transaction which, in the contemplation of the section, is to be seen as having as its purpose the performance of the relevant work and, in that sense it is to be the purpose of both of the parties which leads to the work being performed." 161 In relation to the interim measure claimed by the respondent to exist, but denied by Mr Murton, Mr Federowsky in his affidavit (ex 25) at para 14 said: As an interim measure only and pending payment of the License Payment, Shelly Pty Ltd was allowed by Bartercard Ltd to commence business temporarily and subject to compliance with the Respondent's requirements only after Mr Murton persistently complained that he had sales pending which he did not want to lose. He said to me on many occasions, "I will be able to raise the money required for the purchase of the Licence". Shelly Pty Ltd and Mr Murton had also yet to demonstrate that they had sufficient working capital to operate a brokerage as required under the terms of the proposed Licence Agreement. 162 In oral evidence, Mr Murton denied Mr Federowsky's evidence as to the existence of any interim measure, and also denied that he had ever, in any of his capacities, personal or as director of Shelly and Windjar, told Bartercard, as alleged by Mr Federowsky, that the full licence fee of $75,000 would be paid in cash. 163 The timing of that alleged interim measure could not be established with any precision. 164 Mr Federowsky said that the conversations referred to in his affidavit obviously occurred before the licence agreement was executed, but did not know the exact date of those conversations [that would mean prior to December 1996]. In the October letter Mr Murton had said that he had 20 clients ready to sign up. Mr Federowsky also said that in those conversations, when told Mr Murton had leased some premises, he had advised the latter not to start running the business until the franchise agreement had been concluded. However, Mr Federowsky did think Mr Murton was extremely keen and he was positively affected by Mr Murton's actions and Bartercard at that time, i.e. August 1996, was positive about Mr Murton's intentions. 165 Mr Federowsky said that in early 1997 he had had a discussion with Mr Murton as to operating the agreement on an interim basis. He said that Bartercard has always maintained the position that unless the licence fee is paid the brokerage is not to be operated under the Bartercard banner, except under special arrangements. Mr Murton persistently had troubles paying for the licence, but his partner was Valentino [Kovacic] a fact of which Bartercard was not aware until not long before that. 166 In this case the special arrangements to enter into an interim agreement were made because Valentino [Kovacic] had an extensive history in Bartercard as a trained trade co-ordinator and because of Mr Murton's threats that he might lose potential clients willing to come on board, but whom he felt might be lost if he could not sign them up. 167 It seems to be common ground that the applicant began to trade as the Sydney North franchisee in January 1997. 168 In practical terms what occurred was that there was a period of overlap as between the respondent's acceptance of an interim arrangement and the continuing negotiations in relation to the substantive contract. 169 I find that there was an arrangement entered into between the applicant and the respondent for the applicant to operate as a Bartercard licensee on an interim basis, that that interim arrangement was agreed to in December 1996 and actually was activated around January 1997. 170 I find that that was an "arrangement" in terms of s 105 between the applicant and the respondent. 171 Was that arrangement "unfair, harsh or unconscionable" in terms of s 105(a)? 172 Although, according to Mr Federowsky, that arrangement was subject to compliance by the applicant with the respondent's requirements, specific terms, including those of termination of the arrangement, were not spelled out. 173 On 8 April 1997, Windjar was given until 11 April 1997 to pay the remaining monies outstanding for the licence fees. That was in the context where Windjar had been exploring with the respondent acceptable security for the outstanding trade dollars. That effort had been unsuccessful, but, although it had not until then been considered, there still remained Mr Murton's home. Mr Murton said he had offered it. It was mentioned in one of the earlier loan applications. The respondent's witnesses said it had not been offered. I do not think it had been put forward in any forceful way by Mr Murton. The respondent's witnesses all said that, if offered it certainly would have been considered as being one of the most common forms of security put forward. 174 Mr Murton said that at the time Mr Kovacic and himself had been verbally advised that the licence was to be cancelled, Mr Federowsky and Mr Dietz were still asking each of them individually whether they could provide adequate security. Mr Murton had also had separate discussions with Mr Kovacic. 175 Mr Murton accepted that the only way the applicant could trade between January and April 1997 was because of funding from either himself or Shelly. He also accepted that Mr Federowsky had on a number of occasions in the period January to April 1997 raised with him the payment of the T$50,000 Bartercard trade dollars. 176 On 24 April 1997, Bartercard (Trevor Dietz) sent the following letter: Dear Rick & Valentino, I refer to my recent conversation with Rick and Andrew Federowsky's conversation with Valentino regarding the future operations of the Bartercard Sydney North Brokerage. This letter serves to confirm our verbal advice that the Brokerage License has been canceled (sic) due to your inability to fully fund the purchase price. I note that your Brokerage account is currently in debt by $9927.05 and the script account by $5036.00. These accounts have been frozen. Please advise when arrangements will be made to bring them back to a nil balance. In regard to moneys already paid to us, it is our intent to retain those funds to cover our various costs to date. We very much regret this situation has arisen and now wish to make this final stage of our business relationship one which is handled in a professional and business like manner. 177 It was said by the respondent that, although not specifically referred to, the letter on 28 April terminated any interim agreement that was operating to enable Windjar to operate the Sydney North brokerage. 178 Counsel for the respondent submitted that the same conditions as to termination included in the second licence agreement should apply to the interim licence agreement. 179 Subject to a number of provisos, that period would appear to be 30 days, as set out in cl14.2 of the agreement: 14.2 If either party breaches or defaults upon any of the terms and conditions of this Agreement, other than those identified in Paragraph 14.1 above, the injured party may terminate this Agreement, if the breaching party fails to correct the breach or default within thirty (30) days of the written receipt of notice to do so from the injured party. 180 The applicant was still, at the time the letter of 8 April was sent, and later, in communication with the respondent as to possible security. Adoption of the provisions of cl 14.2 would have allowed him a period until 8 May to try to find satisfactory security. It could have provided the opportunity for him to specifically offer his house as security. In the absence of evidence as to any encumbrances over it, it is not possible to say that such an offer would have resolved the problem of security, but at least the additional time would have presented him with the opportunity to do so. 181 In the absence of the formal setting out of the terms of the interim licence, I accept the respondent's submission that it would be appropriate to adopt the termination requirements of the second licence agreement. In particular, I adopt sub-cl 14.2 which required the applicant in this case to have been given written notice by the respondent to correct a breach or default, and if that breach or default had not been corrected within 30 days of that written notice, the respondent, in this case, may terminate the agreement. That period is in line with the one month period of notice suggested by the applicant as being more reasonable than the three days given by the respondent. 182 The fact that the respondent's counsel had to fall back on to the second licence agreement to provide the terms for the interim agreement, shows the unfairness to the applicant of the lack of specificity of conditions under which the interim licence agreement was to operate. 183 Though not specifically using the words "breach or default", it seems to me that the 8 April letter constituted the written notice required by cl 14.2. However, in setting 11 April as the deadline for payment of the monies owing, the respondent did not allow the 30 days for correction of a breach or default provided for in cl 14.2, that date being 8 May. 184 The further letter dated 24 April confirmed "verbal" advice that the "Brokerage License" had been cancelled due to inability to fully fund the purchase price. That letter also fell within the 30 days allowed by cl 14.2. 185 The respondent advanced two further grounds to justify the termination of the interim arrangement, those going to the condition of the premises and the way in which the interim licence agreement was being conducted, to ground its termination of the agreement. Whatever may have been said by the respondent's representatives as to the untidy condition of the Sydney North offices, and the evidence of Mr Murton as to that point was markedly different, the fact remains that neither complaint nor alleged breach of the agreement was conveyed to the applicant in writing in accordance with cl 14 of the agreement. 186 I find that the interim licence agreement as instituted between the applicant and the respondent as from December 1996 was an unfair arrangement in terms of s 105(a) in its lack of specific terms, particularly as to termination. 187 The arrangement having been found to be unfair in terms of s 105(a), I now need to consider what, if any, orders, should be made pursuant to s 106. 188 The evidence of Mr Burke given in affidavit form, without objection, was that two cheques that totalled $25,000 were interim payments on account of the licence fee for Sydney North, and both cheques were drawn by Shelly Pty Ltd trading as Hodgson & Lee. Those cheques were accepted by the respondent in respect of the agreement between the applicant and the respondent. 189 The sources from which the applicant derived the moneys for the cash component of the price of the franchise, and the arrangements, if any, made for repayment are not matters of concern to Bartercard. The full responsibility for, and benefit from, that $25,000 resides with the applicant. 190 I do not regard the fact that Mr Kovacic was not called to give evidence by the applicant as being detrimental to its case in any major matter. (I view the fact that the respondent did not call him in a similar light.) In relation to the $10,000 coming from him as part of the deposit of $25,000 credited to the applicant, any claim he has is between him and the applicant. 191 Mr Murton entered into the lease at Manly Vale prior to any brokerage agreement being signed. He did so in the furtherance of the applicant's own interests, using the existence of those premises as a means of persuading the respondent to accept one of his proposals as to payment of the franchise fee. 192 Although the offices at Manly Vale were leased by Mr Murton, not by the applicant, Mr Cory said it was not an unusual situation for a director of a company to personally take out a lease for premises to be used by the company. It would seem that Mr Murton's enthusiasm in obtaining the premises was one of the factors that favourably influenced Bartercard to grant the interim licence. 193 Mr Murton said he had entered into the lease on the instructions of Mr Federowsky. Mr Federowsky denied that assertion, saying that Mr Murton had advised him later. Once again, in the absence of documentation, it is not possible to say positively what was the position. Mr Murton did get premises exactly in terms of the respondent's requirements. I accept that there were discussions with Mr Federowsky as to appropriate premises. However, I am not persuaded that the final choice was made on Mr Federowsky's instructions. 194 Mr Federowsky accepted that as from February 1997, Mr Murton was running the Sydney North brokerage. Others in the Bartercard hierarchy were also aware that Mr Murton was occupying premises and, in accordance with at least the interim arrangement made sometime in December, was authorised to operate as a Bartercard licencee. They must have been aware that Windjar in operating the Sydney North Brokerage on an interim basis was incurring some expenses in doing so. The respondent had agreed to the applicant operating under an interim licence agreement in order to further its own interests by not missing out on the business opportunities Mr Murton said existed. It seems to me that, in those circumstances that some credit should be given to the applicant for the rental costs of those premises. There are some difficulties quantifying the amount spent. One difficulty, for instance, for the applicant in producing additional documents sought, it must be said at a very late stage in the proceedings, by the respondent, was that the originals of documents which had been produced in court the previous day had been taken by the landlord when the landlord took occupation of the premises, so they were no longer in the control of the applicant or Mr Murton or any of his associated companies. 195 Bartercard brokerage operations did not actually commence under the interim arrangement until some time in January 1997. That meant that, at most, Bartercard would have had the advantage of the Manly Vale premises, fittings, equipment etc between then and 8 May 1997, that being the final date of the notice I find should have been given, i.e. 4 months or so. 196 In relation to the $25,000 the applicant paid to the respondent, what did it get back for it? Eventually it would seem what it did get back was the opportunity to conduct the Sydney North brokerage on an interim basis for about five months, some training, the use of the Bartercard name and the opportunity to find security acceptable to the respondent to further the applicant's ambitions to take up a franchise. 197 Mr Kovacic and Mr Murton had transferred their Bartercard accounts in February 1998 to the Sydney North brokerage in order to generate some income for that office. According to the respondent's claim the income for Sydney North in the period January to April 1997 amounted to $5,598. Mr Murton contested that figure, his estimation being that that income was around $15,000. 198 As became clear from the evidence of Mr Federowsky and of documents tendered on 12 October 1999, the respondent had the means to clarify that difference, but did not, despite the efforts of the applicant, provide the documentation necessary to do so. The applicant specifically sought in strongly contested interlocutory proceedings to have produced documents relating to Sydney North and was successful before the Court. Mr Bernie advised the Court in these proceedings that despite the Court's decision such documents were not produced. 199 Taking into account all the circumstances put before the Court, I find that orders, including monetary orders should be made in favour of the applicant, but not to the extent claimed. 200 The Court orders: (1) The interim licence agreement made between the applicant and the respondent around December 1996 is varied to provide that that agreement, in the event of breach or default, may be terminated 30 days after written advice has been given by one party as to a breach or default to the other party and that breach or default has not been remedied. (2) Bartercard shall pay to the applicant the sum of $35,000. (3) Interest is to be paid on that amount at the appropriate Supreme Court rates as from 26 March 1998 the date of filing of the application. 201 In coming to the above figure I take into account the items specifically referred to, even if not able, for the most part, to be quantified in any detail. 202 I do not accept the applicant's submission that the respondent was anxious to rescind any agreement to sell the Sydney North franchise for $75,000 with the applicant because similar brokerages were then selling for $125,000, and Bartercard had later sold the Sydney North brokerage for that amount. In my view, the respondent had taken considerable trouble to assist the applicant to try to satisfy the franchise fee requirements. Cross-Claim 203 The respondent claims that the following representations allegedly made to it by the applicant were misleading and deceptive in that the applicant did not have the funds it claimed to have: 3 On or about May 1996 to April 1997 the Cross Respondent represented to the Cross Claimant that: (a) The Cross Respondent had sufficient funds to invest in the Sydney North Brokerage. (b) The Cross Respondent had sufficient working capital to invest in the Sydney North Brokerage. (c) The Cross Respondent had sufficient funds to purchase the Sydney North Brokerage Licence. (d) The Cross Respondent had sufficient funds to secure the credit facility offered by the Cross Claimant to purchase the Sydney North Brokerage Licence. 4 The Cross Claimant relied upon these representations and incurred expenses and costs. … 7 The Cross Claimant claims: (a) Damages; (b) Interest; (c) Costs. (d) An order that the Cross Claimant is entitled to retain the sum of $25,000.00 in respect of expenses incurred by the Cross Claimant referred to above. (e) Such further or other order as the Court thinks fit. 204 Relying particularly on the affidavit of Ms Marsh, the respondent explained why the essence of its cross claim was that it sought to retain the $25,000 paid by the applicant. It was said that what happened was that when Bartercard terminated the interim licence agreement it was faced with debit amounts of the trading for Mr Kovacic and for Bartercard Sydney North and the debit in the scrip amount. It also incurred the expenses of the costs set out on the reconciliation sheet. To try to deal with that it had forfeited, as it was entitled to do, the $25,000 deposit and it applied those moneys against the costs and expenses of the trading account debits and the scrip documents tendered on 12 October 1999. 205 A document headed Bartercard Sydney North - Reconciliation of income and expenses incurred by BCL was annexed to the affidavit of Mr Murton. That document eventually formed the basis for the cross claim made by the respondent. Mr Deitz described the process by which that document came into existence when Bartercard needed to determine what costs it had incurred in the induction and ongoing development of Sydney North. 206 Mr Dietz directed Brook Burke of Bartercard's legal department to gather the information, to be collated by its finance department and then checked by its financial controller, Steve Harris. The document was given to Mr Dietz by Brook Burke, he having received it from Stephen Harris. 207 On 29 September 1999, objections by Mr Bernie to the tendering of the reconciliation document had been overcome on the basis that the original records on which the document was based would be produced to the court and to the applicant no later than 12 October 1999, the next hearing date, together with further evidence from the persons responsible for the document's production. Mr Hodgkiss agreed with Mr Bernie's comment that it was the sort of material one would have expected to be given on discovery. He said his client had been searching for the material. He stated that any evidence coming forward "will only go precisely to that reconciliation document, in other words it is the primary material and also seek to further explain how these things were calculated but there would not be a cent more nor a cent less". 208 As a consequence the affidavit of Nicola Jane Marsh was filed 7 October. That affidavit was the outcome of a direction by the Commission in relation to the abovementioned objection to the so called reconciliation statement. That direction was that if the respondent wanted to adduce any evidence from the person who put together that reconciliation statement, that should be done by the same person. That person was Nicola Jane Marsh. 209 For medical reasons Ms Marsh was not able to travel to Sydney from the Gold Coast and so was not available for cross-examination. Paragraphs 5, 6 and 7 of her affidavit were admitted over objection. 210 Mr Bernie said there was no dispute with regard to the voucher type documents, including a fax which pre dated the start of proceedings and tickets and accounts and Diners Club entry and all of those appear quite clearly to be business records produced at the time for the purposes of the business. However, although Ms Marsh could say she received the information, in relation to the e-mails which were the other annexures to her affidavit and the letter from Mr Dietz, it did not prove those items. 211 Mr Hodgekiss conceded that insofar as such e-mails say that somebody has spent this amount of time, if that particular person has not deposed to that fact, there will not be direct evidence in relation to that, save for this, that the material produced by Nicola Marsh, in fact, constituted a business record of Bartercard and was admissible as a business record. 212 Mr Federowsky, answering questions as to how the reconciliation sheet, on which the cross claim is based, came to be prepared, said that Bartercard kept a separate cost centre of all its activities. If Bartercard sells a licence certain costs are attributed to the income of that sale. In relation to that cost centre, there are checks to ensure that the costs are accurate. He said that the reconciliation document (the cross claim) was prepared by Nicki Marsh, but she had not asked him how much time he had spent with Mr Murton. Ms Marsh had not asked him about his apportionment of time on those days. Apportionment had not been made of air fares to Sydney in either November 1996 or March 1997. 213 Mr Federowsky, in chief, said that the expenses attributed to him in the reconciliation document were true and correct. Taken to his expenses in cross examination, Mr Federowsky conceded, after reference to his diary and other evidence, that, in fairness, not all the expenses would be attributable to dealings with the applicant. He could not say that the expenses claimed had in fact been apportioned to other business undertaken in Sydney during the 2 days in November 1996. It seems clear from the evidence that over 2 to 3 days in Sydney in November 1996, one hour was spent with Mr Murton. 214 Mr Hodgekiss contended that the Browne v Dunn principle would apply in respect of the failure of Mr Bernie to cross examine Mr Dietz and Mr Maddock as to their expenses in relation to the cross claim. Mr Dietz, for instance, had given evidence as to meetings with Mr Murton, though Mr Hodgekiss accepted that precise details as to those meetings had not been particularised. 215 Mr Bernie rejected that submission as to the application of Browne v Dunn in circumstances where it was not for the applicant to open up the respondent's case in cross-examination, when the respondents had not led any evidence. 216 I accept Mr Bernie's submission on that point. 217 The applicant's submission that the biggest Jones v Dunkel point to be made in this case went to the lack of material put forward to support Ms Marsh's affidavit has much force. 218 Very little documentation, other than that which related to a joint venture between Barter-Ball Pty Limited and Bartercard was produced by the respondent, despite the applicant's efforts which were the subject of an interlocutory decision in relation to a summons to produce, in relation to the later financial situation of Sydney North (unreported; Glynn J; 98/1514; 19/3/99). It was noted in that judgment that the respondent conceded an order for discovery by way of a verified list of documents sought by the applicant in respect of the following classes of documents": 1.16 All documents including invoice and/or statements evidencing disbursements expenses and invoices allegedly incurred by the Respondent and/or its servants in respect of the Bartercard Sydney North Franchise/Brokerage as shown in a document prepared by Nicky dated 30 May, 1997 and headed, Bartercard Sydney North Reconcillation [sic] of Income and Expenses incurred by BCL , in which is referred to in Annexure "I" of the Affidavit of Richard Murton sworn 25 March 1998. [ Conceded ] 219 I find that little weight can be given to the reconciliation document. I point also to the fact that, the document also took into account the V Kovacic account, a matter not relevant in these proceedings. 220 Although the sum of $25,000 paid by the applicant was referred to in proceedings as a "deposit", it seems to me that the sum of $25,000 in Australian dollars was one element of the payment for the franchise, the other element being payment of T$50,000 in Bartercard trade dollars. The sum actually referred to as a "deposit" in evidence and submissions was that of $7,500 (i.e. 10% of $75,000) sent to Bartercard around January 1997 in response to a telephone conversation and was not evidenced in writing. 221 I do not accept that the cross-applicant has made out its claim for retention of the $25,000 as forfeiture of a deposit. 222 On 23 April 1997, when Mr Dietz advised Mr Murton by telephone that Mr Murton's license had been withdrawn on 23 April 1997, Mr Murton said he was at the same time advised by Mr Dietz that Mr Murton personally could reapply for the same Sydney North licence at a price of $125,000. Mr Dietz could not recall that conversation, but said that since that time the brokerage had been sold twice, the second sale being for $210,000. The first sale had involved a joint venture with Bartercard and, [on the figures in Ex.20] the price was $125,000, that being in the range of $125,000 to $130,000 for an undeveloped site. 223 According to Mr Federowsky, Bartercard had sold the licence for less than $50,000 to an ex staff member and that all Bartercard had got out of that sale was $30,000 to $40,000. 224 The respondent has not shown that it has suffered any losses at all in respect of its association with the applicant in the Sydney North brokerage. The respondent had the means to do so. 225 Mr Hodgekiss contended that the question of credit was very important. He said one had to treat Mr Murton's evidence with a great amount of caution and wherever it conflicted with that of Mr Deitz or Mr Maddock or Mr Federowsky, their evidence should be preferred. For many reasons the evidence of Mr Murton should be treated with a great amount of scepticism. The most telling reason, was that some 40 or so times the witness asked Mr Hodgekiss to repeat the question, saying that they had not been heard or understood. Before the question was answered there was a short pause and then it was asked to be put again in precise terms, with no explanation. Another reason, amongst many, advanced by him, was the situation of the non-responsive answer. 226 The reactions of witnesses to nervousness are many and varied. To me, Mr Murton was desperately anxious not to give an unconsidered answer, an anxiety understandable in the light of the consequences for him of an unfavourable outcome of these proceedings. 227 As already noted, Mr Murton tended to view all discussions through rose coloured glasses, concentrating on those which favoured his proposed course of action. 228 On my observation of Mr Federowsky and of his evidence, he is a person who tends to consider the "big picture" rather than the details and adopted an expansive approach in response to Mr Murton's eagerness to become a Bartercard franchisee. Mr Federowsky was obviously trying to assist the applicant to come to some solution, acceptable to the respondent, to put up the moneys necessary to secure the franchise e.g. suggesting the sending of the October letter and making the April 1997 application for an increased overdraft limit in Bartercard trade dollars. 229 Neither party presented documentation of any sort as to the contents of the "dozens" of telephone calls that took place over the twelve months or so that these events unfolded. Some of those conversations were quite lengthy, during which a number of matters were discussed. 230 The outcome of that approach and of the personalities of the main actors involved, was, inevitably, misunderstandings left uncorrected in the absence of any written exchange as to positions understood to be reached at any particular time. 231 I do not think any of the witnesses tried to mislead the Court. Mr Murton's genuinely held understanding of events, however, was not always soundly based when the evidence as a whole was examined and, in particular, his understanding that the T$50,000 element of the contract was to be available as vendor finance. 232 Having made those comments as to the witnesses, I add that the actions of Bartercard, the corporate entity, did not always assist the Court. 233 The transcript on 12 October 1999 records that in response to an apology from Mr Federowsky in relation to non compliance with the original schedule, that I said "I accept what you say, Mr Federowsky". I did not use the word "accept". I said "I hear what you say, Mr Federowsky". The words were deliberately chosen. The Court had received no formal explanation as to why Mr Federowsky had not been available, but had been overseas, at the time originally scheduled for him to have given evidence. (The fact that eventually that absence was able to be accommodated without undue drama, did not overcome the fact that precious court time had been spent in consideration of alternative avenues of accommodating his absence on the scheduled day.) 234 On 12 October, Mr Hodgekiss tendered further documents in relation to the reconciliation document, an important document in relation to the respondent's cross-claim, saying: I tender documents which again came to my chambers today. They are pages 1 to 9 which are business records of Bartercard and, quite frankly, they are discoverable documents and should have been produced before now. I apologise that they were not. 235 There was evidence that on 3 April 1997, Shelly had applied for an increase in its credit limit. In the document making that application, Shelly, in the section headed "Financial Information, liabilities and assets", had set out figures under the heading "estimated company turnover" for years since 1994. Mr Cory, taken to the Bartercard credit limit increase form dated 3 April 1997 from Shelly confirmed that the figures set out there in relation to stock, trade, vehicles and turnover in 1995 and 1996 did not look unusual to him and did not appear to be incorrect. In accordance with the rule in Browne v Dunn [(1894) 6 R 67), Mr Hodgekiss had cross examined Mr Murton as to those figures on 28 September 1999. 236 On 12 October 1999 Mr Hodgekiss put to Mr Federowsky a document in relation to Shelly forwarded that morning by Bartercard at Mr Federowsky's request to counsel's chambers. That document showed Shelly's trading history from July 1994 to October 1999. The turnover figures shown were different from those on Shelly's application of 3 April 1997. The document was tendered. In reply to Mr Bernie's objections to the acceptance of that tender on a number of bases, one being that if the respondent had thought there was a false representation contained in the application, it had been open to it to put on an affidavit as to a document that had been in their possession all along. Mr Hodgekiss accepted its absence in any affidavit in chief, advising that the legal representatives had been unaware of the possibility that the document existed until that morning, and had been surprised at its existence. (In any event, in relation to the trading history of Shelly, Mr Federowsky said that history related only to Shelly's dealings with Bartercard, and did not purport to be an exhaustive document in relation to all turnover of Shelly, of which Bartercard would have no knowledge.) ******************* 237 As described earlier in relation to the interim agreement, the applicant did have difficulty in providing security acceptable to the respondent in respect of the Bartercard trade dollars. However, the communications in connection with possible security were continuing as at 8 April 1997, and in my view, had not been exhausted. At that time, the representations by the applicant as to sufficient security, could not be labelled "misrepresentations". 238 I find that the respondent fails on that issue. 239 The cross claim by the respondent is rejected. ******************* 240 The parties are to confer as to costs. If agreement cannot be reached the matter may be relisted for further short submissions. ******************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.