Australian Competition and Consumer Commission v IMB Group Pty Ltd (in liq)

[2002] FCA 402

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v
IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402

TRADE PRACTICES – exclusive dealing – whether the respondents had engaged in third line forcing – whether the offer of a “package deal” constitutes third line forcing – meaning of “services” – meaning of “artificially contrived arrangement” – meaning of “directly or indirectly” per s 47(6) the Trade Practices Act – participation in respondents’ scheme dependent on purchase of an insurance policy

INTERPRETATION – application of s 15 the Insurance Contracts Act 1984 (Cth) – whether an action for the contravention of ss 51AB and 52 the Trade Practices Act was barred by s 15 the Insurance Contracts Act – whether contract of insurance was “made the subject of relief under” the Trade Practices Act – meaning of “unconscionable”

TRADE PRACTICES – unconscionable conduct – whether respondents had engaged in unconscionable conduct in contravention of s 51AB the Trade Practices Act – meaning of “unconscionable” – representations made for the purpose of inducing members of an Aboriginal community to enter into contracts of insurance sold by the respondents

TRADE PRACTICES – misleading and deceptive conduct – whether representations made by respondents were misleading or deceptive – regard to be had to the class of persons to whom the conduct was directed – whether representations made as to future matters were not reasonably grounded – whether representations made as to future matters were not qualified or sufficiently qualified – whether misleading conduct designed to induce the opening of negotiations to purchase goods rather than the final purchase itself contravenes s 52 the Trade Practices Act – whether there was any reasonable prospect of the respondents being able to fund construction of the club and associated facilities as described by the respondents

TRADE PRACTICES – misleading and deceptive conduct – liability of non–corporate respondents associated with the wrongful activities of the corporate respondents

Trade Practices Act 1974 (Cth) ss 4(1), 4(10), 4C, 47(6), 47(7), 52, 52A (now 51AB)

Insurance Contracts Act 1984 (Cth) s 15

Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 49 followed
Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 applied
Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495 applied
KAM Nominees Pty Ltd v Australian Guarantee Corporation Ltd (1994) 51 FCR 338 distinguished
Trade Practices Commission v Legion Cabs (Trading) Co–operative Society Ltd (1978) 35 FLR 372 not followed
West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620 considered
Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 at 463 cited
Hurley v McDonald’s Australia Ltd (2000) 22 ATPR 41–741 at 40,585 – 40,586 cited
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 considered
Blomley v Ryan (1956) 99 CLR 362 considered
Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40–940 cited
TEC & Thomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38 considered
Stuart Alexander & Co v Blenders Pty Ltd (1981) 3 ATPR 40–244 considered
SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14 discussed and applied

Trade Practices Act Review Committee (Chair: TB Swanson), Report to the Minister of Business and Consumer Affairs (1976)
J Lipton, Third Line Forcing in Australia:  Current Problems and Future Directions (1996) 4 TPLJ 77
Report by the Independent Committee of Inquiry (Chair:  FG Hilmer), National Competition Policy Review (1993) AGPS, Canberra
The Macquarie Dictionary, 3^rd ed

N Seddon et al, Cheshire & Fifoot’s Law of Contract, 7^th Aust ed (1997) Butterworths, NSW

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION), LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION), SAMSON NEIL BACKO, DAVID JOHN IVERS, LUKE VINCENT IVERS, JOHN LINDSAY IVERS, LANCE THOMAS STONE, MICHAEL JOHN McLEAN, WILLIAM ANTHONY MUSGRAVE, ROBERT COWLEY AND GLENN JAMES IVERS
QG 175 OF 1993

DRUMMOND J
BRISBANE
5 APRIL 2002

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 175 OF 1993

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

THE IMB GROUP PTY LTD (ACN 050 411 946)
(IN LIQUIDATION)
FIRST RESPONDENT

LOGAN LIONS LIMITED (ACN 060 338 758)
(IN LIQUIDATION)
THIRD RESPONDENT

SAMSON NEIL BACKO
FOURTH RESPONDENT

DAVID JOHN IVERS
FIFTH RESPONDENT

LUKE VINCENT IVERS
SIXTH RESPONDENT

JOHN LINDSAY IVERS
SEVENTH RESPONDENT

LANCE THOMAS STONE
EIGHTH RESPONDENT

MICHAEL JOHN McLEAN
NINTH RESPONDENT

WILLIAM ANTHONY MUSGRAVE
TENTH RESPONDENT

ROBERT COWLEY
ELEVENTH RESPONDENT

GLENN JAMES IVERS
TWELFTH RESPONDENT

JUDGE:	DRUMMOND J
DATE OF ORDER:	5 APRIL 2002
WHERE MADE:	BRISBANE

THE COURT DECLARES THAT:

1.In so far as any of the respondents engaged in the conduct alleged in pars 19 and 20 of the applicant’s Further Further Amended Statement of Claim filed 6 October 1999, they did not thereby engage in exclusive dealing in contravention of s 47 the Trade Practices Act 1974 (Cth).

2.In so far as any of the respondents engaged in the conduct alleged in pars 36 and 37 of the applicant’s said pleading, they did not thereby engage in unconscionable conduct within s 51AB the Trade Practices Act 1974 (Cth).

3.The first, the third to tenth and the twelfth respondents, by representing on 8 September and 16 September 1993 that finance had been approved for the first respondent’s development referred to in the statement of claim, engaged in conduct that contravened s 52 the Trade Practices Act 1974 (Cth).

4.In so far as any of the respondents engaged in the conduct alleged in par 22(b)(i) of the applicant’s said pleading, they did not thereby contravene s 52 the Trade Practices Act 1974 (Cth).

5.None of the respondents engaged in the conduct alleged in pars 22(b)(ii) and (iii) or 23 of the applicant’s said pleading.

6.The first, the third to tenth and the twelfth respondents, by making between July 1992 and September 1993 the representations as to the commencement and completion of the development referred to in par 24(a) and the representations that the completed development would have the attributes referred to in par 24(b) and the representations as to the worth of the completed development referred to in par 28(a) of the applicant’s said pleading, engaged in conduct that contravened s 52 the Trade Practices Act 1974 (Cth).

7.The first, the third to tenth and the twelfth respondents, by making representations in the period between July 1992 and September 1993 in respect of shares to be issued in the public company to be formed by the first respondent and/or in the third respondent in par 21 of the applicant’s said pleading, engaged in conduct in contravention of s 52 the Trade Practices Act 1974 (Cth).

8.In so far as any of the respondents engaged in the conduct alleged in pars 25(a) and (c) and 26(a) of the applicant’s said pleading, they did not thereby engage in conduct that contravened s 52 the Trade Practices Act 1974 (Cth).

THE COURT ORDERS THAT:

9.The issue of costs be adjourned to a date to be fixed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 175 OF 1993

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

THE IMB GROUP PTY LTD (ACN 050 411 946)
(IN LIQUIDATION)
FIRST RESPONDENT

LOGAN LIONS LIMITED (ACN 060 338 758)
(IN LIQUIDATION)
THIRD RESPONDENT

SAMSON NEIL BACKO
FOURTH RESPONDENT

DAVID JOHN IVERS
FIFTH RESPONDENT

LUKE VINCENT IVERS
SIXTH RESPONDENT

JOHN LINDSAY IVERS
SEVENTH RESPONDENT

LANCE THOMAS STONE
EIGHTH RESPONDENT

MICHAEL JOHN McLEAN
NINTH RESPONDENT

WILLIAM ANTHONY MUSGRAVE
TENTH RESPONDENT

ROBERT COWLEY
ELEVENTH RESPONDENT

GLENN JAMES IVERS
TWELFTH RESPONDENT

JUDGE:	DRUMMOND J
DATE:	5 APRIL 2002
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. In this action, the Australian Competition and Consumer Commission (“the Commission”) seeks relief against all save the second, eleventh and thirteenth respondents in respect of the making of certain representations alleged to contravene s 52 (and related provisions) the Trade Practices Act 1974 (Cth) (“the TPA”) and conduct said to contravene the third line forcing provisions of s 47 of that Act.

2. The action arises out of an ambitious scheme for the development of a sporting and entertainment venture to be established in Logan City in the 1990s.  The first respondent, The IMB Group Pty Ltd (“IMB”), actively promoted the scheme from early 1991 to 20 September 1993, when Legal and General Life of Australia Ltd (“Legal & General”) instructed IMB to immediately stop selling its policies:  that was soon after IMB had received adverse publicity in the media and three days after the Commission had taken action against it.

3. The moving spirits in devising and promoting this scheme were Mr David Ivers, a director of IMB and fifth respondent, and Mr Glenn Ivers, an agent of IMB and twelfth respondent.  Each of the fourth and sixth to tenth respondents, the Ivers’ relatives and business associates, played a part in IMB’s activities.  The eleventh respondent, Mr Robert Cowley, played a leading part in promoting the scheme from about mid 1992.  He was last known to be in Australia in about September 1993:  he has taken no part in the proceedings.  Proceedings between the Commission and the thirteenth respondent, Legal & General, were settled a little while after the action was brought.  The Commission brought separate proceedings against the National Mutual Life Association of Australasia Limited (“National Mutual”) in respect of its involvement in the events that have given rise to this litigation.  Those proceedings, after consolidation with these, also were settled.  The second respondent, Redbeak Pty Ltd, was set up at the instigation of Mr Graham, a Commission witness, who was closely associated with the IMB respondents from early 1992 until that association was terminated in late 1992.  Redbeak Pty Ltd was dissolved in circumstances not revealed by the evidence.

4. The third respondent was incorporated in June 1993.  It was to be the corporate vehicle for the rugby league team called “The Logan Lions”, which the other respondents intended would be a member of the anticipated national rugby league competition, and for the management of the entertainment and sporting club development to be built around this rugby league team.

   THE BACKGROUND TO THE IMB SCHEME

5. In the latter part of the 1980s and early 1990s, Glenn Ivers was in business selling insurance policies, including investment policies, as agent for various life insurance companies.  In 1990, Glenn and David Ivers put a proposal to a Logan City rugby league club, the Scorpions, which was in financial difficulties, to assist the club by selling investment policies to club members and paying to the club about 20 percent of the commissions the Ivers would receive from the sale of those policies.  It was in the course of discussions about this proposal with club representatives that the Ivers got the idea of forming a syndicate for the purpose of entering a team in a national rugby league competition and developing a sporting and entertainment project centred on that team.  At that time, it was widely expected that a national rugby league competition would evolve during the 1990s from the activities of the New South Wales Rugby League.  It was also then anticipated that, with the recent change of government, poker machines, long banned in Queensland, would become lawful and so open up a lucrative source of income to sporting clubs and other organisations.  In the “2001 Rugby League Syndicate” document produced by the IMB respondents and dated 22 July 1991, “[t]he introduction of poker machines in Queensland and the massive population concentration around Meakin Park” were given as the “key factors in the decision to base [IMB’s] bid in Logan City”, ie, IMB’s planned bid to enter a Logan City team in the national rugby league competition.

6. The Ivers acquired the first respondent in late 1990 and, by early 1991, had arranged for it to enter into an agency agreement with National Mutual.  Integral to the scheme was the sale by IMB to persons wishing to participate in the scheme of investment policies issued by National Mutual between about March and November 1991 and thereafter, until September 1993, by Legal & General.  A total of about 3,200 policies were sold by IMB.

7. In early February 1991, IMB was generating media publicity about its plan to develop the Scorpions Rugby League Club to the point where IMB could lodge a bid for the entry of a Logan City team into the national competition.  From about March/April 1991, the first respondent promoted investment in the scheme through the purchase of National Mutual policies.

8. The development planned by IMB was modelled on the Penrith Rugby League Club in New South Wales and its team, the Penrith Panthers.  From the outset, presentations by the respondents to the public explaining the proposed project relied on comparisons between the scheme and the highly successful Penrith Rugby League Club, then a far larger club (50,000 members in 1991) than anything in the Logan City area (the largest club then having 500 members).

9. The success of the Penrith club was attributed in large part to:

   “… one of the Rugby League industry’s biggest trumps, poker machines.  Penrith Leagues Club generates a huge percentage of its profits from its army of pokies and that capital has allowed the club to build facilities which are the envy of the Rugby League world.  …  Quite simply Penrith provides the complete entertainment package done in style for the whole family.”  [National Mutual video shown in September 1991]

10. The National Mutual video stated that “with poker machines now set for certain introduction in Queensland, the time is right for Logan City to achieve similar results [to those achieved in Penrith]”.  The Logan City area was seen as having similar socio–economic and demographic characteristics as the Penrith catchment area.  Publicly available information shows that the area was projected to experience rapid population growth, from around 400,000 to over 550,000 within a 15 kilometre radius of Meakin Park by 2001.

11. The respondents’ scheme developed and changed in its details over time.  But throughout, the scheme depended upon the respondents selling sufficient policies to generate the funds necessary to implement the scheme in the various forms it took throughout the 1991 to 1993 period.  The respondents’ initial idea was that the policies would be able to generate that finance as the value of the individual policies increased over time:  National Mutual was prepared to make loans to policyholders against their policies, depending on their value from time to time.  So was Legal & General.  Later, from about the time Cowley became involved in mid 1992, the policies came to be seen by the respondents as a means of raising finance from external lenders because of the security they were thought to offer (together with the additional security over the project assets that would become available as development of the project proceeded).  Of the total of about 3,200 policies sold by IMB in the period between March 1991 and September 1993, 456 were National Mutual policies and the rest were Legal & General policies.  Most of the policies were purchased as a result of people attending seminars conducted by IMB, although some were sold as a result of door–to–door canvassing and telemarketing.  Seminars were conducted at IMB’s premises in Springwood in Logan City from early 1991 to September 1993; towards the end of that period, IMB had over 100 full time employees and the seminars were attracting up to 800 people a week.

12. An outline of the scheme pretty well as it was originally envisaged is contained in the document “2001 Rugby League Syndicate”, which Glenn Ivers said was produced around May 1991 to give to National Mutual.  He acknowledged that this document may also have been given to some persons who bought policies about the time.  This document identified the objectives of the syndicate as being “[t]o enter a Logan City Rugby League Team into the National Competition in the Year 2001” and “[t]o build a successful business around Rugby League in Logan City over the next ten years and beyond”.  It proposed the construction at Meakin Park of a three stage project ultimately comprising a football stadium and leagues club and an international hotel and country club.  Stage 1 was to be constructed in 1994, at a cost of $10,000,000; Stage 2 in 1997, at a cost of $25,000,000 and Stage 3 in 2001, at a cost of $90,000,000.  The document states:  “The entire $125 million Development will be owned outright by 5,000 shareholders, each holding 25,000 $1.00 ordinary shares”.  Funding was to be generated by “[e]ach of the 5,000 Shareholders [contributing] $25.00 per week into an investment policy in their own name with National Mutual contributions are C.I.P. Linked  …  Loans backs against the accumulation in this policy fund each individual share purchaser over three stages”.  A table in the document indicated that each policyholder would be able to obtain loans against their policy to fund a $2,000 share purchase in 1994, a $5,000 share purchase in 1997 and an $18,000 share purchase in 2001.  A comment following this table stated:  “It should be noted that the above figures are not guaranteed, they are estimates only based on particular earning rates which such rates may or may not be maintained and depend of course upon future investment experience”.

13. The “Members Information Portfolio” document of January 1992 describes the share purchase arrangement in more detail.  Whereas the May 1991 document referred only to investors purchasing shares from their policy loans, the “Members Information Portfolio” described in some detail the element of the proposal involving the formation of a public company to undertake development of the scheme with policyholders having the opportunity to subscribe for shares in that company at each stage of the development “over a projected ten year period”.

14. Cowley joined IMB in about March 1992.  Sales of policies had not achieved the numbers IMB had hoped for – only 456 being sold to November 1991.  By late July, the respondents, acting on Cowley’s advice, had decided to reduce the original number of syndicate members from 5,000 to 2,000 and to seek funding by means of what was described by Cowley as a private placement or loan funds to enable Stage 1 of the scheme to be completed by 1994.  In an interview published in the Albert & Logan News on 24 July 1992, David Ivers, as Managing Director of IMB, was quoted as saying that IMB had realised that a change in direction was needed because, after two years, it had only been able to sign up about 1,200 investors and that the syndicate would be limited to 2,000 instead of the 5,000 originally planned and IMB would resort to a public float to fund the project.

15. Cowley was an effective salesman:  he established the field interviewing division of IMB which ultimately ended up with upwards of 800 people a week coming to seminars.  Sales of policies increased substantially.  Cowley also held himself out to IMB (and Legal & General) as experienced in corporate finance; he claimed he had arranged finance for numerous projects throughout Europe.

16. Cowley, who spent much time overseas from about July 1993 seeking to find a financier for the project, was last seen in Australia in September 1993.  The respondents first conceded that Cowley was a fraud at the end of the Commission’s opening address.

1. Soon after Cowley joined there were significant changes not only to IMB’s plans for financing the project, but to its sales procedure as well.  From July 1992, it was represented to those attending seminars that the project would be funded from borrowings or a “backer” taking shares.  The number of policyholders to be signed up was reduced.

2. IMB continued selling the policies up to 20 September 1993, when they were instructed by Legal & General to “cease immediately selling any Legal & General life policies at or immediately after the seminars you have been holding to promote the Logan Lions Football Club”.

   THE AUDIENCE TO WHICH THE SCHEME WAS PITCHED

3. The target market is conveniently described in the respondents’ “2001 Rugby League Syndicate” document [Ex C8 tab 2], produced either in late 1991 or, more likely, in early 1992.  It describes the syndicate as “a concept designed to give the average working person the opportunity to participate in a major sporting, recreational and leisure development”.  It also states that:  “the target for the club should be the ‘middle Australian Family’  …  It should be the place where the community comes for recreation – in this case, that community is very much ‘mum, dad and the kids’ in the middle to lower socio–economic group.”

4. In determining the likely effect of the conduct that is alleged to be misleading or deceptive, it is necessary to have regard to the class of person likely to be exposed to that conduct. This class can be identified in general terms as residents of the Logan City area possessing the characteristics referred to in this “2001 Rugby League Syndicate” document. Some marketing occurred further afield, in Rockhampton and Moranbah in central Queensland (in about March 1992), in the Camu Aboriginal Community in far North Queensland (in about July 1992) and in parts of New South Wales, though most activity was concentrated in Logan City. But, as the evidence in this case demonstrates, it is wrong for the Court charged with determining whether conduct contravenes the provisions of s 52 the TPA to assume that the class of persons likely to be exposed to the relevant conduct fits some homogeneous stereotype conveyed by expressions such as “mum, dad and the kids in the middle to lower socio–economic group”. As Hill J said in Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 49:

   “In the end, the question is not whether account is to be taken of the effect of the conduct upon the gullible, but whether the conduct in question is misleading or deceptive.”

5. The IMB witnesses (and the Commission witnesses also) who attended IMB sales seminars, most of whom bought policies, came from a variety of backgrounds.  They included tradesmen, clerks, teachers, a psychologist, a full–time university student, a social worker, pensioners, semi–skilled workers, people in lower–level management positions and people self–employed in a variety of unskilled and semi–skilled occupations.  While many of IMB’s witnesses would not, I expect, reject the description of being “average working persons”, those who gave evidence to the respondents, who had almost all bought policies, presented, with a relatively small number of exceptions, as intelligent people, not apparently overly suggestible.  Though a minority at trial did not have a very good understanding of the structure of the scheme as presented to them by those acting for IMB, most did.  Many gave pretty convincing evidence that they were aware there were risks in respect of various elements of the scheme.

   CHRONOLOGY

March/April 1991

IMB commences to solicit members of the public, in personal interviews and at seminars, to invest over a ten year period in a rugby league football team to enter the Sydney Rugby League Football competition by the year 2001 and a sporting complex at Meakin Park through a National Mutual savings plan.

15.5.91

After a meeting between Mayor Golledge, Deputy Mayor Alderman Ayling and Alderman Lutton of Logan City Council and David Ivers, Glenn Ivers and Backo of IMB, the Deputy Mayor gives a letter to IMB recording that IMB “will be given first option on the use of the area currently covered by the sewerage treatment plant” in Meakin Park subject to “certain performance criteria”, viz, “that their proposed development is built in stages and is proved effective”.  The letter also states that:  “Upon presentation of the final concept plans formally to the Council, I believe that the IMB Group will be given a favourable hearing and the appropriate decision for a lease over areas not included in the treatment plant area will be forthcoming.”  In oral evidence, Deputy Mayor Ayling said that “the performance criteria” referred to in the letter also included IMB satisfying the Council “that it was not just a profit–making situation for a number of people, but … there was direct benefit back to the community at all times, not just for the sport of rugby league, but for all sports and community organisations.”

23.5.91

Advice of McCullough Robertson sought by IMB prior to the commencement of marketing the syndicate.  Advice formed the basis of IMB’s offer to members of the public throughout 1991 – 1993.

28.5.91

Kendalls KBM, Chartered Accountants, preliminary financial analysis prepared for IMB.  This analysis, based on several assumptions, the principal one being “proposed attendance figures”, and the author’s knowledge of the entertainment industry in Australia, gave projections from net profit from a retail centre comprising bars, restaurants and poker machines which would complete a full year of trading in 1995, a sports and entertainment centre which would complete its first full year of trading in 1998 and a football stadium which would complete its first full year of trading in 2002.  Kendalls recommended that IMB engage a specialist organisation such as the International Feasibility Corporation Pty Ltd (“IFC”) to undertake a further feasibility review.

3.7.91

Informal approaches made to Logan City Council on behalf of IMB in relation to the proposal to develop a sporting complex and IMB is invited to make a formal submission for the development of Meakin Park.

18.7.91

Ken Arthurson, Australian Rugby League Chairman, wrote to IMB, subsequent to a meeting in Sydney with IMB, expressing the ARL’s qualified support for IMB’s proposal to enter a Logan City team in the national competition.

July 1991

Michael McLean, ninth respondent, loans a sum of $147,661.00 to IMB.

21.11.91

National Mutual commissioned Coopers & Lybrand to conduct an independent investigation of the syndicate funding concept.  Coopers & Lybrand report is favourable to IMB.

November 1991

National Mutual limits its involvement with IMB to 600 policies.

12.12.91

Letter from Mayor Golledge, setting out the Council’s general support for the IMB concept.

December 1991

IMB is appointed agent of Legal & General, recruited by Bill Graham.

17.12.91

IMB corresponds with members of Sam Backo’s family in Vanuatu regarding a proposal to develop, as part of IMB’s scheme, a resort there, this being the only approach to any authority in Vanuatu regarding this proposal.

27.12.91

Legal & General Umbrella Financial Plan Summary prepared by Bill Graham for IMB indicating that at an interest rate of 8%, cash value at the end of twelve years would be $28 451.  Quote used as the basis for the “share purchase schedule” in the “Members Information Portfolio”.

Early 1992 to mid 1992

IMB distributes “2001 Rugby League Syndicate Members Information Portfolio” [Ex C8 tab 15] to audience members at sales seminars and promotions.

24.1.92

IFC feasibility study sent to IMB.

31.3.92

IMB’s 2001 Rugby League launch held at Beenleigh Rum Distillery.  In the presence of 400 guests, IMB presents its Logan Lions submission to Mr Arthurson.  Extensive media publicity.

11.5.92

Arthurson writes to IMB stating that IMB’s submission appeared to conform with guidelines for entry and would receive serious consideration.

May 1992

IMB commissions advertising company to produce a marketing plan for the syndicate.  “Logan Lions” team name selected on advice of IMB’s marketing consultant, Adentity Pty Ltd.

May/June 1992

IMB engages Robert Cowley in a managerial capacity.

27.7.1992

IMB announces that a public float of shares will be released and that the original number of syndicate members will be reduced from 5,000 to 2,000.

October 1992

IMB distribute a newsletter entitled “Lions Roar” containing the following statement:

“Work on the magnificent multi–million dollar Logan City Sporting Complex planned for the Meakin Park site will get underway in mid–1993 if corporate finance negotiations proceed as planned, project directors, the IMB Group, has said.

IMB Managing Director, David Ivers, said the intention now was to proceed with capital raising for the complex via a public float with 1,300 of the originally planned 5,000 founding members having already taken up the option to join.

‘The original target of 5,000 was too unrealistic in terms of the initial time frame we had set and to enable building to start in 1993, we have decided to reduce the local content to 2,000 and to go to the public for Stage One,’ Mr Ivers said.”

1.10.92

IMB submits a business plan disclosure document for an agreement in principle for the lease of Meakin Park [Ex C8 tab 26] to the Mayor of Logan City.  Document prepared by Cowley with assistance from IMB directors.  The document identifies the principal avenue for funding is “to seek Legal & General’s agreement to take an equity position through a private placement …  Meetings are planned with Legal & General’s Board late October …”

22.10.92

Legal & General learns of this suggestion and State Manager, Mills, writes to IMB requiring removal of any suggestion of current or future financial support from Legal & General for proposal from a redrafted presentation to the Council, since “this scenario has  never been considered or discussed in the past and is unlikely to be in the future”.

November 1992

About 1,200 policies sold to date.

17.11.92

Bill Graham resigns from Redbeak Pty Ltd, the Legal & General master agency through which IMB was agent for Legal & General, and severs his connection with IMB.  [From February 1992 until this time, no preparation of plans for the proposed development or engagement or liaison with consultants or builders in regard to it is conducted by IMB.]

26.11.92

IMB representatives attend a Logan City Council Finance Committee meeting to discuss business proposal of 1.10.92.

After meeting, IMB instructs Sydney–based accountants to begin formulation of the Town Planning Application and senior partner of the accounting firm flies into Brisbane for meetings with Council officers and IMB representatives.

2.12.92

The Council by letter advises IMB to make a formal submission to the Council regarding the project “seeking approval in principle in the first instance”.  The Council’s Finance and Policy Co–ordination Committee had met with IMB representatives on 26 November and the project was considered by the Council at its meeting of 1 December.

April 1993

IMB distribute a second edition of its newsletter entitled “Lions Roar”.  [Ex C8 tab 29]

April 1993

Deputy Mayor Ayling and Mayor Golledge decide to recommend to IMB and to the Council that Logan Park should be the preferred site for the development, rather than Meakin Park, “due to the size of the project as it was then proposed” and “the needs of the current tenants of Meakin Park”.

1.5.93

IMB signs consultancy agreement with a Cowley company.  Cowley’s primary task is to secure loan funding for the development, although he is also heavily involved in the establishment and running of the field interviewing division, ie, the marketing arm of IMB.

May 1993

IMB representatives meet with Mayor Golledge and Deputy Mayor Ayling; IMB decides to shift its focus from Meakin Park to Logan Park because of the “enormous associated infrastructure cost in terms of decommissioning of the sewerage treatment plant and roadworks” at Meakin Park.

1.6.93

Logan Lions Limited incorporated as a public company.  [Michael McLean allotted 135 shares in Logan Lions Limited because of financial contribution to IMB in July 1991.]

June 1993

Logan Lions Limited presents a business plan for “the development of a major international sports complex” and for “entry of Logan Lions into the Winfield Cup competition” [Ex C8 tab 31] to the Council.  This plan was prepared by Cowley and relates to the establishment of the project at Logan Park.  The plan identifies “the funds required” as A$20,000,000 by September 1993 to construct Stage 1, with a further A$20,000,000 for Stage 2 and A$80,000,000 for Stage 3.  It identifies three development stages as follows:

Stage 1:  December 1993 – December 1995, construction of a 15,000 member leagues club with a minimum of 200 poker machines;

Stage 2:  1998 – 1999, expansion of the leagues club to provide facilities for up to 60,000 members and housing minimum 600 poker machines;

Stage 3:  2003 to 2008, A$80,000,000 development with 40,000 seat main stadium designed to allow upgrade to 60,000 seats; further club facilities upgrade to 100,000 member capacity, minimum 960 poker machines.

The plan acknowledges that funding is not in place, but asserts that:

“There are in fact several routes, through which the funding of this complex could be achieved successfully.  The primary one is to seek a conditional offer of backing from a marketmaker or backer, for a AUD$20 million private placement with a Zero coupon mortgage over the complex, further collateralised through the maturing asset value of the policies in force and a 100 percent claw–back of any equity, after the retiring of the agreed debt.”

1.7.93

IMB meets with Logan City Council Finance and Policy Co–ordination Committee.  Committee  minutes recommend that the Council approve in principle the proposal for development of Logan Park as detailed in the Logan Lions business plan.

9.7.93

The Council advises IMB that it “has approved in principle, [the] proposal for the development of Logan Park as detailed in [the] business plan subject to compliance with all statutory requirements in relation to the leasing of the land, the Contaminated Land Act and the requirements of all relevant Government Departments”, and subject also to “further studies being undertaken in relation to traffic, transport and car parking needs associated with the proposed development”.

July 93

Cowley goes overseas to seek project funding.

28.7.93

Trade Practices Commission (“TPC”) corresponds with IMB requesting, inter alia, information as to whether the Council has approved the construction of the Logan Lions club house.  IMB also receives inquiries from the Australian Securities Comission (27.7.93), Logan City Council (29.7.93) and Consumer Affairs (30.7.93) about its activities.

Early August 1993

David Ivers and McKnoulty, partner in McCullough Robertson, solicitors retained from the outset by IMB, meet with Gustafson and Reghenzanie of the Australian Securities Commission (“ASC”).  ASC is concerned that IMB is selling a participation interest in a company without a prospectus.  At conclusion of meeting, David Ivers requests ASC to give written notification of the fact that they had investigated and given approval to the marketing activities of IMB.  ASC says that it is not their policy to give written clearances.  ASC takes no action against IMB.

Early August 1993

IMB deals with Logan City Council – The Council had received a complaint regarding one of IMB’s field interviewers who had represented that he was from the Council.  All field interviewers required by IMB to sign a declaration to the effect that they followed IMB’s standard “qualifier” and did not deviate from this.

Early August 1993

IMB representatives meet with Gillard and Camileri of Queensland Consumer Affairs.  Consumer Affairs takes no action against IMB.

4.8.93

Mateffy Perl Nagy (Queensland) Consulting Engineers Structural & Civil advise the Department of Environment and Heritage of their involvement in the proposed development of Logan Park.

5.8.93

Dynamic Designs writes to the Town Clerk of Logan City Council advising of its retainer by Logan Lions Limited in the proposed development of Logan Park.

6.8.93

David Ivers, with other IMB representatives, meets with Guthrie and Jennings of TPC.  TPC identifies conditioning of access to options or shares in Logan Lions Limited on taking out a Legal & General policy as its major concern.

10.8.93

McCullough Robertson writes to TPC advising of steps taken by IMB to meet Commission’s third line forcing concerns.  IMB seminar presentation changed to extend offer of shares in Logan Lions Limited to anyone who wishes to find their own cash to subscribe $25,000 when shares will become available in ten years’ time.  IMB sets up a register to reserve a share entitlement to such persons.

11.8.93

Kay Dibben, Sunday Mail journalist, attends an IMB seminar at Springwood.

13.8.93

IMB is notified by McCullough Robertson that the TPC is threatening court action if they do not receive certain undertakings by 17.8.93.  McCullough Robertson says Commission has received a report on 11.8.93 that at a recent seminar an IMB presenter said that the only way to get a club membership was to buy a Legal & General policy.

15.8.93

Article by Kay Dibben published in Sunday Mail under headline “Logan Lions In Hot Water – Hard sell tactics attacked”.  Article refers to TPC investigation.

18.8.93

The Council publishes a notice disassociating itself from any assertions to the effect that the Council has approved, formally endorsed or otherwise affirmed its support for the project other than to advise its preparedness to entertain a formal application for approval of the development proposed by IMB.

16, 17 & 18.8.93

Further correspondence between the TPC and IMB regarding the allegations.

23.8.93

Sunday Mail publishes article under headline “Council In Clash On Club Project”, reporting criticisms of IMB.

24.8.93

ASC Officer Gustafson prepares report on his attendance at an IMB seminar the previous evening.  Gustafson reports:  “The scheme as presented on the night, was in accordance with our understanding, based on previous discussions with the promoters.  …  It was our opinion that the statements made during the presentation, particularly with respect to risks and obligations were accurate …”

25.8.93

IMB told by project architect, Nelson, that IMB will have to tender for Logan Park as part of the Council’s approval process.

27.8.93

Logan Lions formally give Cowley authorisation to seek Stage 1 funding.

29.8.93

Sunday Mail publishes article under headline “Leagues club promoter bankrupt”.  Article refers again to TPC investigation and to Glenn Ivers being an undischarged bankrupt.

2.9.93

Cowley advises IMB he has been successful in arranging for “a guarantee of loan performance to AUD$ 20 million … from FIRST ASSURETY CAPITAL CORPORATION out of IDAHO”.

9.9.93

Cowley faxes IMB a letter from one Dinitz (said to be involved in arranging the loan guarantee from First Assurety Capital Corporation) which states:  “Please be advised that the surety bond for this transaction can be secured and placed.  …  The surety bond side will require that a letter of intent to be issued by the bank making this loan that said loan is actively being considered …  Once we have that in place the formal papers will be forthcoming from the surety side”.

15.9.93

IMB stages a national media launch, at which Cowley and one Agathonoff, of the organisation willing to provide funds, announce that IMB has funding of $20,000,000.  Glenn Ivers becomes suspicious about Cowley.

16.9.93

IMB receives letter from TPC (dated 15.9.93) notifying that they intend to initiate proceedings against IMB.  IMB responds to TPC allegations by detailed fax.

17.9.93

Federal Court proceedings No QG175 of 1993 commenced against IMB and others by the TPC.

17.9.93

Logan City Council’s Town Clerk writes to Sommerville, a surveyor and one of the IMB/Logan Lions Limited consultants, proposing the establishment of a “project team” to facilitate the Council’s approval process with respect to the project.

17.9.93

Cowley quoted in Albert & Logan News that he was confident that the loan to IMB would go ahead.  Michael McLean, Glenn Ivers and John Ivers discuss suspicions about Cowley with David Ivers.

20.9.93

IMB receives letter from Bullen, Group Director of Legal & General, instructing IMB to immediately cease selling Legal & General policies.

From 20.9.93

Legal & General withholds commission payments to IMB.  IMB lays off its entire staff of over 100 within two days and IMB eventually closes down.

Early November 1993

Logan City Council calls for expressions of interest for proposals in relation to the development of Logan Park.

11.11.93

IMB goes into voluntary liquidation.

19.11.93

Logan Lions Limited submits its expression of interest for the development of Logan Park enclosing as the “Financial Viability” part of the submission the Vienna Trust Merchant Bank Limited’s conditional offer to finance dated 9.11.93 provided by Cowley.

16.12.93

Logan City Council Finance and Policy Co–ordination Committee recommends that the Logan City Council “agree in principle to the offering of a long term lease to Logan Lions Limited for the purposes of constructing and operating sporting and recreational facilities at Logan Park” and that the agreement in principle be subject to all necessary approvals from relevant government departments; negotiations between the Council and Logan Lions Limited in relation to the structuring and terms of the sub–lease, including the establishment of critical performance criteria in default of which the lease will be deemed cancelled and the requirement to bond the performance in relation to the intermediate criteria; satisfactory negotiation with the Queensland Government in relation to the availability of a lease term necessary to accommodate the sub–lease proposal; Logan Lions Limited satisfying the Council as to the soundness of its financial commitment to the project and negotiations between the Council and Logan Lions Limited on the staging of the proposal.

15.3.94

The Council grants formal approval for the execution of the agreement to lease Logan Park to Logan Lions Limited.

16.3.94

Draft agreement to lease provided to Logan Lions Limited by Council’s solicitors, Corrs Chambers Westgarth.

25.3.94

Albert & Logan News report, on 25.3.94, on the Council’s decision to enter into a lease with Logan Lions Limited.

April 1994

Albert & Logan News report on Logan Lions Limited decision to withdraw from negotiations with the Council due to its inability to obtain funding.

THE IMB SCHEME A SCAM?

1. The Commission’s case is that this scheme was one which never had any real prospect of being realised. The Commission’s position, put in different ways at different times during the proceedings, was that the scheme was only a vehicle for selling a large number of investment policies and generating large amounts of commission for David and Glenn Ivers (and others associated with them). In closing submissions, the Commission modified its position a little, accepting that the Ivers did have the intention of developing a football club, but only as a means of making money for themselves from commissions from the sale of insurance policies. Consistently with this approach, the Commission during the trial abandoned much of its case as was based on allegations that the respondents had engaged in conduct in contravention of s 52 the TPA by making representations, in connection with the sale of investment policies, about their activities with respect to arranging for the Logan Lions Rugby League team to participate in “The Sydney Rugby League Competition” and “The National Competition”.

2. Whether the scheme was essentially a device for generating a large commission income for the Ivers and some of their associates was not investigated by the Commission in any detail.  Some of the respondents put their own money into the scheme in the early stages.  David Ivers put about $20,000 into it and he said his parents put something of the order of $100,000 into it; the ninth respondent, a close associate of the Ivers, put nearly $150,000 into the scheme.  All appear to have lost these investments.  I accept this evidence.  But some of the respondents have been prepared, when it suited their purposes, to substantially overstate the extent to which they put their own moneys at risk.  Coopers & Lybrand were engaged by National Mutual in November 1991 to review IMB’s activities and report on them to National Mutual.  At a meeting held on 13 November 1991 between Coopers & Lybrand and IMB, attended by Glenn and David Ivers, Mr Sam Backo and Mr Michael McLean, “Backo advised, and other executives at the meeting concurred, that some $750,000 had been invested by the executives present or their family members”.

3. The evidence before the Court does not permit a precise view to be formed on how the commission moneys received by IMB from the sale of policies amounting to several millions of dollars were expended.  Glenn Ivers said that all the commissions earned from the sale of policies were “put towards trying to get this project to come to fruition”.  IMB’s expenditure on the scheme must have been very large:  its full–time staff at one stage exceeded 100 people.  At the start of the trial, the respondents produced a document entitled “Expense Comparison … 1993, 1992, 1991” which they said showed a total commission income in this period of $1,459,993, with total expenses exceeding that by nearly one–third.  Glenn Ivers acknowledged, however, that the total commission income received by IMB was of the order of $2,000,000.  Far and away the biggest expense item was “salaries and wages”:  it accounted for over 46 percent of the commission income of nearly $1,500,000 shown in the document.  The submission by the Commission that most of the commission income received by IMB was expended on that company’s operating expenses and not on development of the project appears likely to be correct.  Most of the numerous consultants involved from time to time in the project were, according to the Ivers’ evidence, engaged on the basis that they would only be paid if the scheme went ahead.  The financial information available to the liquidators of IMB, West & Co, at least as at December 1993, was incomplete.  But it does indicate that each of the fourth to eighth and the tenth and twelfth respondents were paid from IMB’s funds each week fairly modest amounts, by way of salary, in the period 1 July 1992 to 31 October 1993.  The ninth respondent received no remuneration.  Those records show that the only one of the respondents to receive payments by way of consultancy fees was Cowley, the eleventh respondent; David Ivers says that he or his associated companies were paid a total of $111,412 in the period 5 July 1992 to 14 September 1993.

4. I accept that the commissions were, in substantial part, put back into IMB to fund its activities in selling policies.

5. When, in opening the Commission’s case, counsel said that the respondents’ real purpose was to use the scheme as a vehicle for selling policies and garnering millions of dollars in commissions, counsel also directed attention to how the selling procedures adopted by IMB changed after Cowley’s arrival “to a very hard sell, slick presentation”.  That the respondents adopted such an approach was put in support of the Commission’s case that the real object of the IMB scheme was to generate a substantial commission income for the Ivers and their associates.  The Commission’s witnesses Ms Dibben, Graham and Mr Matijasevic gave evidence that the respondents did use “hard sell” tactics to pressure people into buying policies.  It is convenient to deal now with the question whether the respondents did employ such tactics and with the major attack made by the respondents on the credibility of these three Commission witnesses.

   A HARD SELL EXERCISE?

6. At the end of July 1993, the Commission, the ASC, Queensland Consumer Affairs and Logan City Council all contacted IMB to raise concerns that each had about different aspects of its activities.  At exactly the same time, Dibben, a journalist with the Sunday Mail, was contacted by a woman who complained to her about IMB’s activities.  Dibben’s informant told her that she was going to complain to the Commission also.  Dibben procured an invitation from IMB to attend the seminar held on 11 August 1993.  She operated her tape recorder intermittently during this seminar presentation and later made what she called “a rough transcript” of the tape recording, now lost.  Her first article, which dealt in part with the seminar, was published in the Sunday Mail on 15 August 1993.  It included a prominent sub–heading “Hard sell tactics attacked” and a statement attributed by Dibben to an independent financial adviser she had sought out, who said that while the overall concept had merit, he was concerned about reports of “hard sell” methods.  It would appear that, though the sub–heading was the work of a Sunday Mail sub–editor, not Dibben herself, the overall impression she had of IMB’s activities was one of a “hard sell” exercise.

7. Dibben, in her statement dealing with what took place at the seminar of 11 August 1993, spoke of statements made by Glenn Ivers to the effect that the Legal & General Savings Plan (that she understood the person needed to buy to have the opportunity to purchase shares in Logan Lions at par and to receive foundation life membership) would yield the $25,000 necessary ten years hence to buy the 25,000 $1 shares at par.  She also said she was told by a female representative of IMB – almost certainly Ms Monique Tenboer – at the end of the seminar that Logan Lions already had a 99 year lease on Logan Park and, by another IMB representative, Dallas Reeves, that IMB had “a stamp duty lease” on Logan Park and that, so far as Council approval for the development was concerned, IMB had 50 percent approval.  Dibben also said she telephoned IMB the following day and spoke to a woman named Monique, who answered her question about what the shares mentioned at the seminar the previous evening would be worth by saying that, when Logan Lions was up and running in about ten years, a conservative estimate of the value of the shares would be $4 to $5.

8. I have reservations about the reliability of much of Dibben’s evidence.  I think it likely she went to the seminar she attended already of the view that IMB’s activities probably involved sharp practice and had that view confirmed by what she considered was the “hard sell” approach of the IMB representatives.  I think her unjustified perception that IMB was engaging in this sort of sales tactic coloured her account of her dealings with IMB people.  I do not suggest she did anything other than record her recollections of her dealings with IMB when she gave the Commission her statement dated 6 September 1993.  But Monique Tenboer – the woman she spoke to after the seminar of 11 August 1993 and the “Monique” to whom she spoke on 12 August 1993 – gave credible evidence contradicting Dibben’s statement that she had given an unqualified opinion that the shares would be worth $4 to $5 in ten years’ time.  Tenboer also denied Dibben’s evidence that she told Dibben that IMB had actually got the lease of the land and she confirmed the accuracy of Dallas Reeves’ statement concerning his dealings with Dibben on the night of 11 August:  Reeves died before the trial.  He contradicted what Dibben had to say about him telling her that IMB had a “stamp duty lease”.  Mr and Mrs Worrall, who attended the seminar on the evening of 11 August 1993, do perhaps tend to confirm Dibben’s evidence that she was given the impression by Glenn Ivers during the seminar that the only way to get the opportunity to buy shares in Logan Lions and life membership was to buy a policy, in so far as they say Backo told them as much in a conversation they had with him at the premises after the seminar.  But otherwise, they contradict Dibben’s account of what was said during the seminar.  They contradict her evidence that things were said in the course of the seminar that created the impression that Logan Lions was assured of entry in the New South Wales Rugby League competition:  they said they were told only that IMB was, in effect, very optimistic that the bid would be accepted, though there was no guarantee of that.  Though Dibben does not mention being told during the seminar of the status of the Council lease on Logan Park and refers to that only in the context of speaking with a female representative at the end of the seminar – Monique Tenboer – Mr and Mrs Worrall said that the seminar meeting was told that IMB had been involved in an extensive approval process with the Council, which was prepared to consider its application, but IMB had to conform to all requirements and there were no “absolute guarantees that final approval would be given”.  They say that Glenn Ivers did invite members of the audience to nominate likely share values in ten years’ time and wrote on a whiteboard one of the extreme suggestions of $12 and then some more “cautious or realistic figures”.  But they both say they were told that there could be no guarantees as to what the future value of the shares in Logan Lions might be and that they were also told that if IMB failed to get the project off the ground, then the policy purchaser would still have an investment policy in his own name.  What Dibben described as “the rough transcript” she made of the tape recording of the seminar appears to cover all of the events of the evening of 11 August 1993.  The document is not, however, in the sequence that could be expected of such a tape recording.  Nor does it mention some matters that appear in Dibben’s statement of 6 September 1993, such as Glenn Ivers’ opening suggestion about earning $100,000 in ten years’ time.

9. Graham was closely involved in the selling of Legal & General policies to people prepared to participate in the IMB scheme throughout 1992.  He, with a number of the other respondents, was a director of Redbeak Pty Ltd, once a respondent but now in liquidation, a company interposed between Legal & General and IMB.  He was called by the Commission and gave evidence damaging to the respondents in a number of respects.  He too spoke of the “hard sell” approach adopted particularly by Cowley.

10. However, I am not prepared to accept his evidence as reliable.  Contrary to his evidence, he was forced to sever his involvement with the IMB scheme and resign his position as a director of Redbeak Pty Ltd on 17 November 1992 by others of the respondents who were the other directors of that company.  It was established, though Graham denied knowing anything about it, that at his direction, Legal & General, instead of paying a sum of over $13,000 to IMB in respect of commissions on policies sold in September 1992, credited that sum in reduction of Graham’s personal loan account with Legal & General.  There is reason to think that this sum was but part of the total amount of commissions that Graham diverted from IMB to his own use.  His evidence, that in late 1992 an IMB representative stood up and said at a sales seminar that they had raised $20,000,000, is unacceptable:  he appears pretty obviously to be referring to what he learned took place at the Logan Lions media launch on 15 September 1993, long after he had severed all connection with IMB.  In oral evidence, he significantly qualified his evidence that at seminars Glenn and David Ivers and Cowley each made statements that the Australian Rugby League had approved the application for a team from Logan to join the Sydney competition.  The respondents developed in their submissions a detailed attack on Graham’s credibility.  The Commission did not attempt to answer this attack save in respect of a couple of peripheral matters.

11. The Commission also called Matijasevic, who had worked for IMB from the end of June 1993 to the end of the following August.  Matijasevic said he quit his job because of differences he had with his boss, Mr Bill Musgrave, the tenth respondent.  He said Musgrave and a Ms Wilkinson, who between them conducted the instructional sessions for sales staff which he attended each morning, both urged sales people to adopt a very “hard sell” approach.  He gives details of the instructions he got, particularly from Musgrave, about how to pressure clients into committing themselves before leaving a seminar.  He also commented in his first statement to the Commission of October 1993 that Mr Stone, the eighth respondent, expressed concerns about Musgrave’s approach as being too “hard sell”.  Musgrave did not give evidence.  Though Matijasevic said in his statement of October 1993 that he was good at selling policies in the “hard sell” way that Musgrave instructed him to follow, in cross–examination he denied ever using “hard sell” tactics himself.

12. The respondents attacked Matijasevic’s credit on the ground that he was biased against them because the respondents sacked him.  Matijasevic said it was he who made the decision to leave IMB.  He had considerable difficulty in getting on with his immediate superior, Musgrave.  He acknowledged that he did not like Musgrave.  I do not, however, accept that Matijasevic’s evidence should be disregarded because of bias against any of the respondents.  He appears to have quickly become a valued employee of IMB.  Belatedly located IMB employee records show that he was not dismissed, but had resigned.  David Ivers, who claimed he dismissed Matijasevic after complaints from Musgrave and Wilkinson, proffered a range of other, unconvincing reasons for dismissing Matijasevic.  I prefer the contemporaneous records of IMB to David Ivers’ evidence here.

13. I do not accept what Dibben, Graham and Matijasevic say about IMB using “hard sell” tactics.  There is an abundance of evidence from people who bought policies about the complete absence of any “hard sell” approach and of the immediate willingness of all the IMB people they dealt with to respect their wishes to go home and think about things before deciding whether to commit themselves to buying a policy.  All the IMB witnesses, including Gustafson from the ASC who attended an IMB sales seminar on 23 August 1993 without revealing his identity as an ASC officer, expressed the view that no “hard sell” tactics were used.  Some gave convincing explanations of the opportunities they were given to think about whether they would buy a policy, which further shows that whatever else the IMB operation may have been, it was not one which employed “hard sell” tactics to sign up people to the insurance policies.  See, eg, Messrs Stokes, Taylor and Brooks and Mr and Mrs Worrall (who decided not to purchase a policy).  Though those of the respondents and some of the people employed by IMB who were involved in dealing with potential purchasers of policies, described the scheme in a highly optimistic light to encourage people to buy policies, there was no attempt to pressure people into doing that.

    THE RESPONDENTS ENLIST THE SUPPORT OF OVER 1,300 WITNESSES

14. There is another barrier to accepting that the Ivers were only in the scheme for the commission moneys they could make from it.  Though IMB’s activities came to a stop in about September 1993, the Ivers have been able to maintain extraordinary support from a very large number of people who, on the Commission’s view of things, are the respondents’ victims.

15. To prove its case based on representations contravening the TPA, the Commission, in addition to the statements contained in documentary material generated by the respondents and used in IMB’s promotional activities, ultimately called evidence from eighteen witnesses: thirteen had attended various IMB seminars or took part in a face–to–face interview with an IMB representative, one, Matijasevic, was a former employee of IMB and another, Graham, a former business associate of the respondents. Two experts and an officer of Logan City Council, made up the rest of the list.

16. The Commission had initially intended to call a total of about seventy witnesses, many of whom had participated in IMB sales presentations. The respondents asserted and put on evidence to show that it might be arguable that the Commission had engaged in conduct, in procuring statements from a large number of these people, sufficient to justify the exclusion of their evidence on discretionary grounds under s 138 the Evidence Act 1995 (Cth). The Commission did not rely at trial on any of these witnesses. Ultimately, it confined its case, so far as people who had participated in IMB marketing activities, to the fifteen witnesses mentioned. No attack was made by the respondents on the evidence of any of these fifteen witnesses in reliance on s 138 the Evidence Act.  The Commission contended that it had, in fact, decided to limit its case to twenty of its seventy witnesses in December 1997 and had told the respondents this before the respondents raised this challenge.  (See its letter to IMB, Ex C101.)  There this matter rested and I therefore draw no adverse inference against the Commission because it so confined its case.

17. In order to answer the Commission’s case by showing that some of the oral representations alleged by the Commission were not made by IMB or those working for it, and to establish that people who attended the seminars, including the many who bought investment policies, were given a clear picture of the risks involved in participation in the IMB scheme, the Ivers and those working with them, often it seems without legal assistance, were able to enlist the continuing support of many hundreds of people, procure from them signed statements for use in these proceedings and also procure expressions of willingness to attend to give evidence at Court.  The respondents filed statements from a total of 1,340 people they intended to call as witnesses.  These statements were broken down by the Commission, in a fashion with which the respondents agreed, into Categories A to J.  Category A comprises statements by five of the respondents, but there is attached to Glenn Ivers’ statement, statements from eleven other persons holding positions in third party organisations such as the Australian Rugby League, Logan City Council, National Mutual, Legal & General, etc, most of whom also gave evidence.  Category B comprises statements obtained from seventeen former employees of IMB, while Category C comprises statements obtained from seventeen people who attended IMB promotional seminars, some of whom purchased policies, and who had also provided statements to the Commission.  Categories D to J comprise statements either in the form of the witness’ own answers to various forms of questionnaire prepared by IMB or statements prepared by IMB on the basis of questionnaires answered by the witnesses.  There are 1,302 such statements.  Many of the witnesses who gave statements in Categories D to J did not take part in a one–to–one interview with anyone acting for IMB, but rather attended meetings convened by IMB to solicit their assistance as witnesses and filled out the questionnaires they were then given either before leaving the seminar or later, at home.

    THE CATEGORY J WITNESSES AND THE SAMPLE OF FORTY OF THOSE WITNESSES

1. The Category J witnesses, 439 in all, are particularly important.  They all attended IMB’s promotional seminars and bought policies as a result.  Their statements were generated from their answers to a questionnaire drafted by an experienced barrister then retained by the respondents.  This questionnaire was answered by each Category J witness some years after the sales seminar they had attended.  It directed the person’s attention to the factual issues central to the Commission’s case in so far as that was based on the oral and written promotional information disseminated by IMB.  Though broadly in standard form, a large number of the statements contain significant variations reflecting the views on matters of relevance to the litigation of the individual who provided the particular statement.  The 155 Category H and the 633 Category I witness statements were procured by the use by the respondents of forms of questionnaire that were accepted by the respondents as not likely to elicit information from those witnesses that focused with precision on the issues in the litigation.

2. The respondents began by wanting to call all 439 of the Category J witnesses. I was not prepared to allow that. The respondents accepted that. There was much discussion about how justice could be done to the respondents’ answer to the Commission’s case based on the making of representations in contravention of the TPA, given that the respondents’ answering case acquired so much of its force from the large number of witnesses prepared to contradict the Commission’s case. Ultimately, the parties agreed to the District Registrar randomly selecting forty of the Category J witnesses from the entire 439 and to my relying on my assessment of their evidence as an indication of the likely effect of the evidence of all 439.

3. The Commission has made some trenchant criticisms of the exercise that produced the 439 Category J witness statements and of the reliability of the Category J witnesses in the sample of forty who were called to give evidence.  The Commission points out, on the one hand, that the form of the questionnaires and the circumstances in which the Category J witnesses were asked to complete them – presentations by the Ivers highly critical of the Commission’s actions – was such as to be likely to produce the answers the respondents wanted.  But other submissions by the Commission recognise that this did not in fact occur:  the Commission points to the significant disparities in the recollections of the Category J witnesses about what was said at the seminars at which the respondents’ representatives gave scripted or standard form presentations.  As will appear, the Category J witnesses who gave evidence were not blind supporters of IMB:  their evidence covers a range of views on the issues in the case.  Some advance IMB’s case on some, but not all issues on which they were proofed.  Some give evidence that does not assist IMB on other issues.

4. Not all the Category J witnesses attended meetings convened by the Ivers years after IMB’s collapse in an endeavour to enlist the support of people as witnesses in this litigation; a small number received questionnaires which they later filled out in other circumstances, eg, Mrs Lowe received her questionnaire through the post at her Mackay home and Mr Elliott was telephoned by David Ivers, who asked him to fill out the questionnaire which Elliott picked up from Ivers later on.  But most of the Category J witnesses in the sample who gave evidence got their questionnaires at these meetings.

5. However, it is, in my opinion, clear that though the Ivers at these meetings criticised in strong terms the actions of the Commission in moving against IMB in September 1993, they put no pressure on anyone to fill out the questionnaires and no pressure on anyone to give particular answers to the questions asked in the document.  At least ten of the Category J witnesses said they completed the questionnaires at the meeting.  But at least eight of the Category J witnesses who gave oral evidence took the questionnaires they were given at the meetings home, completed them there at their leisure and returned them later on to the Ivers.  Elliott and Lowe also completed their questionnaires at home.  None of the Category J sample witnesses agreed with suggestions in cross–examination that any of the respondents sought to influence the answers they provided to the questionnaire.  Some gave evidence that the Ivers took care not to do that.  Mrs Lane said that, when she asked David Ivers to assist in answering one of the questions, he refused, telling her she had to answer the questionnaire herself and Miss Duncan recalled that the meeting she attended was told by the IMB representative that it was up to the people there to decide for themselves whether they wished to answer the questionnaire and that, if they did so, they should base their answers on their own recollections of what took place at the earlier sales seminars the subject of the litigation.

6. The Commission also points out that shortly before each of the Category J witnesses gave evidence, they were given another questionnaire by the Ivers.  This document asks a series of questions directed to significant issues in the litigation and thus matters about which the witness could expect to be cross–examined.  Various of the witnesses filled out these pre–evidence questionnaires.  The Commission criticises this process as having influenced the content of the oral evidence given shortly thereafter by the particular witness.  It is not surprising that some of the witnesses repeated in their oral evidence the substance of what appears in their pre–trial questionnaire:  the witnesses were there dealing with issues central to the litigation about which they were cross–examined soon after.  It appears from the form of this document, of which Ex C96 is an example, that the witness filling out this particular pre–trial questionnaire answered in his or her own words, often volunteering relevant information beyond what would have been a sufficient answer to the particular question.  The use of this pre–trial questionnaire by the Ivers does not appear to be too dissimilar from the practice of counsel having a pre–trial conference with witnesses.

7. The Commission, in its closing submissions, argued that the 439 statements from which the sample of forty was taken comprised only those people the respondents wished to call to give evidence and did not include those contacted who refused to give evidence or complete questionnaires.  Whether there was any significant number of people who had purchased policies or had attended seminars without purchasing policies, but who had been contacted by the respondents and refused to give evidence or complete questionnaires was not the subject of any investigation by the Commission.  But even if there were only 439 from the thousands who attended the IMB sales seminars in 1991 to 1993 prepared to give evidence for the respondents, that would still show a very high level of support for them.  The Commission’s submission that the random selection was made from persons sympathetic to the respondents should be rejected:  persons were included in Category J because they had provided statements in response to a professionally settled questionnaire.  Witnesses in Categories H and I were not relied on by the respondents because the questionnaires used to generate their statements were not drawn with the precision of those given to the Category J witnesses.  Yet there were 788 witnesses in Categories H and I.  To be able to obtain the co–operation of 1,227 people in providing statements for possible use in litigation is, in my opinion, a remarkable indication of widespread support for the respondents’ defence to the Commission’s case within the community in which the respondents continue to live.

8. Some, but by no means all, of the Category J witnesses could be thought to have a motive, in the form of a financial expectation in the event of the Commission’s case failing against the respondents and the respondents ultimately succeeding in making out a claim for damages against the Commission.  The respondents already have representative proceedings against the Commission on foot in the Supreme Court on behalf of persons who were members of the Logan Lions Syndicate in the period January 1991 to September 1993.  David Ivers said a couple of hundred persons had given their consent to this action being brought.  He could not say how many of the Category J witnesses had given their consent.  It is likely some did.  By no means all did, as the oral evidence of the respondents’ witnesses shows.  Of the thirty–three of the forty Category J sample witnesses who gave evidence, only one, Elliott, said he had heard of a possible class action by IMB against Legal & General or the Commission in relation to the Logan Lions project; he said, however, he had not agreed to be part of it, at least as at the time he gave evidence.  The respondents also called a number of Category J witnesses, thirty–five in all, none of whom were included in the sample of forty selected by the District Registrar.  Nine of these thirty–five were aware that IMB had brought proceedings in respect of the closure of the Logan Lions project:  five of these nine (Messrs Martin, Taylor, Roche, Soper and Mrs Bolt) had indicated their willingness to participate in that action.  The massive support that the respondents were able to obtain and maintain in connection with this litigation from people who, on the Commission’s case, are their victims requires caution on the part of the Court before accepting that the witnesses were motivated by the hope of personal financial advantage and the respondents’ activities can be explained as motivated merely by personal gain.

9. Ultimately, only thirty–three of the sample of forty selected from this pool of potential Category J witnesses were actually called by the respondents. Seven of the forty Category J witnesses selected in the sample could not be located or for other reasons could not be called by the respondents, though the written statement of Ms Naysmith was marked as an exhibit, without objection: she was willing to give evidence, but could not afford to travel to Brisbane. Mrs Wainwright was wrongly said by the Commission, in its closing submissions, not to have been called: she gave oral evidence on which she was cross–examined. A number of the thirty–three who gave oral evidence turned out to have no useful or only a very poor recollection of relevant events. They were Messrs Black, Cook, Shepherd and Ketter, Mrs V Nothling, Ms Whitworth, Mrs Watson and Mrs Brown. (The respondents expressly abandoned reliance on the last two.) Three, Messrs Foss, Gaston and Demaine, were wrongly included in Category J: they did not attend promotional seminars, but purchased policies as a result of face–to–face interviews. The remaining twenty–two provided evidence that was useful in showing what took place at a large number of IMB seminars and the impressions each came away with about the effect of what was said about the topics about which the Commission claims IMB made representations contravening the TPA. Though the extent to which each of these twenty–two witnesses supported the respondents’ case varied, it is of importance that none gave evidence that provided any significant support for the Commission’s case save on the issue concerned with representations as to the future value of the shares offered by IMB. Though only thirty–three of the sample of forty selected from the 439 Category J witnesses gave evidence and only twenty–two gave evidence of value, that does not detract from the fact that the respondents were in a position to call many hundreds of people long after the scheme collapsed to support their defence to the Commission’s claims.

10. The respondents called seventy–one witnesses in all.  A large number of these, including thirty of the Category J sample witnesses who gave evidence at trial, had attended IMB promotional seminars and a further group had taken part in interviews with an IMB representative at their homes.  All save two bought policies.  These two, Mr and Mrs Worrall, attended the seminar of 11 August 1993 also attended by the journalist Dibben, who then wrote articles critical of IMB.  They gave evidence contradicting Dibben’s account of what was said at that seminar.  Some of the witnesses called who attended seminars were Category J witnesses who had not, however, been selected by the sample exercise.  Nor were they present at seminars attended by any of the Commission’s witnesses.  They were called, pretty obviously, because the respondents thought their evidence would bolster their case.  The respondents called most without objection by the Commission, until well into the trial, to this departure from the process for calling only a sample of Category J witnesses.  Ultimately, the Commission agreed to the respondents calling the limited number of such other Category J witnesses that they did.

    EXCLUSIVE DEALING

11. The Commission alleges that the respondents’ conduct, set out in par 19 of the latest version of its statement of claim filed 6 October 1999, constitutes conduct contravening s 47(6) the TPA, while the respondents’ conduct set out in par 20 of the pleading contravenes s 47(7) the TPA. The allegations are:

    “18.To induce members of the public to purchase ‘Lifestyle Protection Plans’ and ‘Umbrella Financial Plans’ the IMB National Mutual Agents (with respect to the period February 1991 to January 1992) and the IMB Legal & General Agents (with respect to the period January 1992 to September 1993) at the seminars and during the interviews, engaged in the conduct referred to in paragraphs 19 to 29 hereof.

    Exclusive Dealing

    19.Offered to supply to persons attending the seminars services, namely the benefit or privilege of:

    (a)an opportunity or option to acquire shares in a company (which became the third respondent) or alternatively, to acquire such shares upon terms more favourable than might be available to members of the public;

    (b)an opportunity to become a foundation life member of ‘the 2001 Rugby League Syndicate’ or alternatively of a club with the benefits and privileges attaching to such membership,

    on the condition that those persons acquired services, namely:

    (c)in the period from in or about March 1991 to December 1991, from The National Mutual Life Association of Australasia, rights and benefits under a ‘National Mutual Lifestyle Protection Plan’ policy;

    (d)in the period from in or about January 1992 to and including September 1993, from Legal & General Life of Australia Limited, the rights and benefits under a Legal & General ‘Umbrella Financial Plan’;

    PARTICULARS

    The applicant relies upon the following facts and matters:

    (i)In the period March 1991 to in or about December 1991:

    Ex C 3 (Video)

    Ex C 8 tabs 3; 4; 5; 15 (brochures)

    Ex C 18 (Hansen)

    Ex C 19 (Matlick)

    Ex C 24 (Jones)

    Ex C 36 (Christie)

    (ii)In the period January 1992 to in or about November 1992:

    Ex C 8 tabs 15; 17A and 21

    Ex C 14 and 16 (Graham)

    Ex C 29 (Eden)

    (iii)      In 1993:

    Ex C 4

    Ex C 21

    Ex C 9 (Dibben) – 11 August 1993

    Ex C 8 tabs 15 and 21

    Ex C 37 (Colbran) – 23 June 1993

    Ex C 32 (Matijasevic) – June to August 1993

    Ex C 39 (Webster)

    Ex C 40 (Stokes)

    20.Alternative, refused to supply to person services, namely the benefit or privilege of:

    (a)an opportunity or option to acquire shares in a company (subsequently to become the third respondent) or alternatively to acquire such shares upon terms more favourable than might be available to members of the public;

    (b)an opportunity to become a foundation life member of ‘the 2001 Rugby League Syndicate’ or alternatively of a club with the benefits and privileges attaching to such membership,

    for the reason that such persons had not agreed to, or did not continue to acquire services, namely:

    (c)in the period from in or about March 1991 to December 1991, from The National Mutual Life Association of Australasia, the rights and benefits under a ‘National Mutual Lifestyle Protection Plan’ policy;

    (d)in the period from in or about January 1992 to and including September 1993, from Legal & General Life of Australia Limited the rights and benefits under a Legal & General ‘Umbrella Financial Plan’.

    PARTICULARS

    The applicant relies upon the following facts and matters:

    (i)In the period March 1991 to in or about December 1991:

    Ex C 8 tabs 3; 4; 15 (brochures)

    Ex C 18 para 12 (Hansen)

    Ex C 36 (Christie)

    (ii)In the period January 1992 to in or about September 1993:

    Ex C 9 (Dibben) – August 1993

    Ex C 8 tab 21 ‘Dear Founding Member’ letters

    Ex C 8 tab 28 ‘Lions Roar’

    Ex C 39 (Webster)

    …

    31.Further, the conduct referred to in paragraphs 19 and 20;

    (a)constituted exclusive dealing in contravention of section 47 of the Act;

    (b)was misleading and deceptive or likely to mislead or deceive in contravention of s.52(1) of the Act;

    (c)constituted the making of false or misleading representations as to the need for services, namely, the rights and benefits under The National Mutual Life Association of Australasia’s ‘Lifestyle Protection Plan’ and the rights and benefits under Legal & General’s ‘Umbrella Financial Plan’ in the terms promoted by the IMB Group, in contravention of s.53(f) of the Act.”

12. The references to persons by name in the particulars in these paragraphs of the Commission’s pleading are to the statements of those persons put in evidence by the Commission.

    SECTION 47 THE TRADE PRACTICES ACT – THE STATUTORY PROVISIONS

13. Exclusive dealing is dealt with by s 47 in Pt IV the TPA, headed “Restrictive trade practices”. Section 47(1) provides: “Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.” It is the practice of third line forcing (or third party tying), a form of exclusive dealing, that is prohibited by s 47(6) and (7). Section 47(6) provides:

    “A corporation also engages in the practice of exclusive dealing if the corporation:

    (a)supplies, or offers to supply, goods or services;

    (b)supplies, or offers to supply, goods or services at a particular price; or

    (c)gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation;

    on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person.”

14. Section 47(7) provides:

    “A corporation also engages in the practice of exclusive dealing if the corporation refuses:

    (a)to supply goods or services to a person;

    (b)to supply goods or services at a particular price to a person; or

    (c)to give or allow a discount, allowance, rebate or credit in relation to the supply of goods or services to a person;

    for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person.”

15. Section 47(10) provides:

    “Subsection (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in subsection (2), (3), (4) or (5) or paragraph (8) (a) or (b) or (9) (a), (b) or (c) unless:

    (a)the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or

    (b)the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening competition.”

1. I have explained why I am not prepared to accept the evidence of Graham and Dibben as sufficiently reliable.

2. Hansen said that at a seminar he attended in April 1991, David Ivers said words to the effect that “[w]e’ve been promised land at Meakin Park by Council …”.  He bought a National Mutual policy soon afterwards.  (He says he was given the “2001 Rugby League Syndicate” document attached to his statement at that April 1991 meeting, though it includes copies of architect’s plans dated “November 1991”.)

3. Mrs Jones said that at a sales seminar she attended on 14 September 1991, Backo, in response to a question by a member of the audience at one stage, pointed out the window to Meakin Park and said words to the effect that “[t]he syndicate has a guarantee of this land.  The Logan City Council has promised it to the syndicate …”.  Mr Christie attended what seems to be the same meeting of 14 September 1991 that Mr and Mrs Jones attended:  the two families went together to a meeting addressed by both Backo and David Ivers.  Both Mrs Jones and Christie speak of each being given a video to take to show friends who might be interested in joining the syndicate.  Christie does not mention any comment by Backo of the kind described by Mrs Jones.  He, however, refers to a statement by David Ivers to the effect:  “Council will let us have the land at Meakin Park for $1 million”.  Mrs Jones does not mention such a comment.  Deputy Mayor Ayling and Roycroft, the respondents’ witnesses, were at the same meeting on 14 September 1991 attended by Mrs Jones and Christie.  They do not support either Mrs Jones or Christie and recall quite different statements about the extent to which IMB then had security of tenure in respect of Meakin Park.  Roycroft’s recollection of what he was told of the status of the respondents’ dealings with the Council was that certain councillors agreed with IMB’s ideas and liked the concept of a multi–sports complex.  It is rather unlikely that, if Backo had publicly stated that IMB had “a guarantee of” Meakin Park from the Council or if David Ivers had spoken of an agreement to get the land for $1,000,000, the Deputy Mayor would not have recalled that.

4. Matlick says that she and her husband, in late June/early July 1991, met with an IMB sales representative who told them, among other things, that “they had a 99 year perpetual lease on the Meakin Park Sewerage site land”.  Glenn Ivers said the IMB representative she dealt with appears to have been Coe.

5. Other Commission witnesses gave more qualified evidence about why they got the impression from what they were told that IMB had a Council assurance of tenure to the land.  Colbran may have gained that impression not from being told in so many words that IMB did in fact have Council approval for the land, but because she inferred that they must have had that approval because of what they had to say about Meakin Park being where the club was going to be built.  Eden, in her first statement of 14 October 1993, said she gained the impression from what Glenn Ivers told her at a seminar on 4 November 1992 that “Council approval would not be a problem”, then saying only that Glenn Ivers added that Mayor Golledge was a founding member.  In her supplementary statement of 26 July 1996, she said, however, she gained that impression because he said words to the effect:  “Verbal approval has been obtained” and that “we have the land”.  She made no mention of these matters in her earlier statement as having caused her to get the impression she did about Council approval not being a problem.  Rutherford said that, at the seminar conducted in Rockhampton in April 1993 by Backo, the latter gave Rutherford the impression that Logan Lions had been given Council approval for the development at Meakin Park.  He does not explain the basis on which he got this particular impression, though it appears he was told by Backo that construction was expected to be under way by Christmas 1993 and, it may be because of this, that he drew inferences about Logan Lions having secured the finance to fund the development (as he said he did) and about having the necessary Council approvals.

6. I accept that these Commission witnesses attempted to give their honest recollections of what was said on particular topics in the course of fairly lengthy meetings with IMB representatives.  But assessment of the significance of their evidence cannot be made without evaluating the evidence of the Category J witnesses, both sample and non–sample, who were called by the respondents to give evidence about this issue.

7. The twenty–two Category J sample witnesses, who I have indicated gave evidence which I regard as of use, gave evidence of having a range of understandings with respect to IMB obtaining a lease from the Council over Meakin and then Logan Parks.  But all believed that no lease had been granted and no binding agreement to give a lease had been reached at the dates of the seminars they attended between 3 August 1991 and 18 September 1993.  The witnesses White, Judge and Lane, who attended seminars in August and October 1991, each said that what they were told was to the effect that, while discussions were under way between IMB and the Council, no lease had then been obtained.  The witnesses Ward, Moore and Duncan, who attended seminars in August, October and December 1992, each gave evidence contrary to the notion that those seminars were told that the Council had granted or agreed to grant or had already approved the grant of a lease over Meakin Park.  The witnesses Lewis, Cox, Lascelles, Wisby, Duel, L Nothling and I Beutel gave evidence of having attended seminars in February, March, April and June 1993.  The evidence given by each, though differing quite widely in its terms, was all to the general effect that, while IMB was hopeful of obtaining Meakin Park, no firm decision had been made and there was no guarantee that they would get it.

8. The witness Churchward, who attended a seminar on 8 July 1993, said that he understood that IMB was awaiting Council approval.  He also gave evidence of there being some uncertainty about just where it was then intended to build the complex; he referred to two separate areas, one appearing to be Meakin Park, the other Logan Park, as the two areas then under consideration.  The witnesses Ashcroft and Mundy, who attended seminars on 10 and 12 July 1993, gave evidence to similar effect to that of Churchward about there being uncertainty as to the exact site for the development, with no definite decision being made by Council though it was favourably disposed to the project.  That these three witnesses who attended different seminars in early July 1999 each recalls being told something of the change from Meakin Park to Logan Park as the site for the development enhances, I think, their reliability as accurate reporters of what was said on each occasion.

9. The witness Brooks, who attended a seminar on 14 July 1993, said, in unchallenged evidence, that his understanding of the status of Logan Lions’ application for a long term lease over Logan City Council land was that:  “The project was okay in principle, but that there were no guarantees.  We understood that all work with Council was preliminary and no agreements were entered into”.  Elliott, who attended a seminar in February 1993, gave similar evidence.  The witnesses Wainwright, Cooper and Thomas attended seminars between mid July and late August 1993.  All three gave evidence, again differing in its terms, but to the general effect that a lease had been applied for, but no decision had been made by Council.  Lowe gave evidence of attending a seminar on 18 September 1993.  She understood that a long–term lease had been applied for by Logan Lions and that as long as the Council’s criteria were met, “there was a very good chance that it could be approved”.

10. The evidence of these twenty–two sample witnesses suggests that there is a very substantial body of evidence available to the respondents showing that it is unlikely that the respondents made representations with respect to Meakin Park and Logan Park of the kind the subject of the Commission’s allegations in pars 22(b)(ii) and (iii) and 23 of the Commission’s pleading.

11. So far as the numerous witnesses called in addition to the thirty–three Category J sample witnesses are concerned, the Commission criticises the summaries made in closing submissions of the evidence of a small number of these witnesses and submits that the summaries cannot therefore be relied on.  But, apart from this, the Commission does not suggest that the summaries of evidence of the other witnesses are unreliable.  The Commission says, eg, that the witness Rix, who according to the respondents’ summary gave evidence in relation to the lease approval issue in his written statement that “[t]he status of the application was that it was an application and nothing was yet approved”, was not cross–examined.  The Commission says this is wrong.  However, reference to the transcript said by the Commission to demonstrate this erroneous statement shows that the summary correctly states that Rix was not cross–examined about his understanding of the status of the respondents’ title to any Council land.  Though he was cross–examined, as the Commission suggests, at transcript p 1286 about some matters touching on the Council’s attitude to the project, he was not cross–examined on this particular important evidence.  The respondents accurately summarise what the witness Kennedy has to say in his statement about the Council’s attitude to the project being that it “was okay in principle but there was no guarantees”.  The Commission comments simply that “the reference to the evidence of Mr Bernard Kennedy in the ‘Logan City Council’ column [of the summary] is incorrect”.  The reference to transcript p 2014 is, as the Commission contends, wrong.  However, if one goes to transcript p 2099, Kennedy explains the basis for his opinion in cross–examination.  The same criticism is made of the summary of the evidence of Bert George.  The summary is accurate, though the transcript reference should be to p 1496.

12. Reference to the evidence of this class of witness generally shows that the summaries of their evidence in relation to the Council tenure issue are accurate and that these witnesses, generally speaking, gave evidence of being told at seminars or by IMB representatives about IMB’s optimism at getting tenure from the Council, but also being told, in effect, that there was no guarantee that a lease would be granted or that the matter had got no further than that the Council was considering IMB’s application and was favourably disposed to it.

13. There is such a mass of evidence contradicting the limited body of evidence produced by the Commission in relation to the issues concerning Council approval raised in pars 22 and 23 of the Commission’s pleading that I am not prepared to find that the Commission has made out any case within pars 22 and 23 of its pleading.

14. The Commission also relies on statements in various of the documents, including transcripts of seminars, prepared by the respondents.  It submits that statements made at seminars, including statements about the imminent commencement of construction, also “create the impression that approval had been obtained” from the Council.  But it is unclear whether some of this material was ever displayed to any members of the public, while printed material that was publicly disseminated generally records that IMB did not have any unqualified right to use Meakin Park for the project.  For example, the “Members Information Portfolio” document used through the first half of 1992 refers, at p 10, to each stage of the project only being undertaken when the approval of the various government and local authorities is in place.  At p 12, the document states that the club facilities will be on Logan City Council land “subject to a long term lease to the Company yet to be finalised”.  Page 8 describes Meakin Park as “the proposed site” and p 9 states:  “Negotiations with both Local and State Government have uncovered a groundswell of support for the project”.

15. The respondents undoubtedly presented an optimistic view of their prospects of obtaining a lease of Meakin Park from the Council.  But, in their written material, they generally put suitable qualifications on their optimistic statements to prevent it being said that they were representing that they had already secured from the Council tenure to Meakin Park.

    FINANCE APPROVAL

16. The Commission says in its written submission that par 30 of the further amended statement of claim alleges that:

    “in the period from in or about June 1993 to in or about September 1992 (sic – should be 1993), the first respondent represented to the effect that finance in an amount of $20 million had been approved for the development.”

17. This is a more limited allegation than that made with respect to “finance approval” in par 29 of the Commission’s last pleading, the further further amended statement of claim filed 6 October 1999.  The respondents did not object to dealing with the case on this issue, so framed.

18. The allegation here is that the respondents made a representation as to an existing fact, viz, that certain finance had already been arranged.  The Commission’s case is that that representation was misleading or deceptive because no such finance had been arranged at any relevant time.

19. It was in mid 1992, after Cowley joined IMB, that IMB decided to abandon the idea of using the loan facility of each policy as the source of direct funding for the project and seek external funding secured by, among other things, assignments of the policies to the lender.  As is apparent from the statements made in the business plan IMB submitted to the Council three months later, in October 1992, no progress had been made in identifying an external lender for the project.  The business plan identified the principal avenue for funding as Legal & General.  But the respondents had no basis for thinking Legal & General might seriously consider taking on that role.  Immediately after Legal & General learned of the suggestion made to the Council by IMB for its involvement as potential funder for the project, it took action to ensure that IMB would not repeat that suggestion.

20. By October 1992, only about 1,200 policies had been sold.  Between November 1992 and September 1993, however, a further 2,000 policies were sold:  in this period a major effort was put into persuading people to invest in the scheme by buying policies.  But despite this intense and successful activity engaged in by the respondents, they continued to make no progress at all in finding someone prepared to finance the project.  It was not until May 1993 that Cowley was engaged on a formal basis as a consultant to IMB.  It was only then, according to David Ivers, that Cowley “became virtually full time on the project”, with his “primary task” being to secure funding for the project.  In June 1993, soon after it had been incorporated, the third respondent submitted its own business plan to Logan City Council.  This plan was prepared by Cowley with input from some of the other respondents.  In the section headed “The Funds Required – Reason & Route”, the document states:

    “The company intends developing stage 1 with a private placement of AUD$20 million.”

21. It is apparent from the section of this plan dealing with what is referred to as “the route” for raising this money that the position remained the same as it was when, a year previously, IMB first decided to fund the project with borrowings from an external lender:  the respondents were no closer to identifying anyone who might fill that role.

22. On 15 September 1993, IMB staged its national media launch.  All respondents were present.  In the course of this launch, Cowley, introduced as representing “Investment Suisse SA”, stated:

    “You can’t do anything without money and for the last seven weeks I have been overseas talking to banks and to other institutions putting in place guarantees because we had the funding here in Australia for Stage 1 through a private placement of $20 million from the IFR Group out of Melbourne subject to the appropriate supporting bank guarantees.  We’ve put that in place.  First Collateral Assurety Corporation who specialise in underwriting projects like this have put the guarantees in place and subject to the transaction or documentation now that’s being prepared, IFR group will fund the initial Stage 1 through this private placement and I would just like to welcome to the platform – would you help me welcome Peter Agathonoff representing the IFR Group.”

23. Mr Agathonoff responded to Cowley’s invitation by saying:

    “It is our intention to fund the first stage of the $20 million of the Logan Lions because we believe its a worthwhile project to the community and subject to the necessary documentation we will fund Stage 1.”

24. The statements made on 15 September 1993 by Cowley and Agathonoff are the only evidence put forward by the respondents suggesting they had actually been able to identify someone prepared to provide finance for the scheme.

25. But Glenn Ivers says it was at this very time he began to suspect whether Cowley was acting bona fide.  On 17 September 1993, the local media reported statements by Cowley about him being confident that the loan would go ahead.  The reaction of McLean, Glenn Ivers and John Ivers was to speak with David Ivers about their suspicions as to whether they could have any confidence in Cowley’s claims that funding had been arranged.  No loan funds ever materialised and, at the start of the trial, the respondents acknowledged that Cowley was a fraud and had never arranged on any basis, conditional or otherwise, any loan funding for the project.

26. It is clear that the respondents never at any time had any ground for representing or for allowing any of the staff of IMB to represent that funding for any part of the scheme was ever in place.

27. The Commission witness Colbran said in her statement of 28 September 1993 that, at the seminar she attended on 23 June 1993, a couple of people spoke about the project.  One was Backo.  She said that from what she was told by these people, she was given the impression that the IMB group had secured $20,000,000 in overseas funding for the development of the first stage of the complex.  She elaborated on this in her further statement of 18 July 1996 by saying that she could recall one of the speakers at that seminar saying words to the effect:  “We have got financial backing for $20 million”.  Colbran was clear in her recollection that what she was told indicated that IMB had definitely got this finance.  IMB’s witness Fuhrmeister, who attended this same seminar, denies that any statement about IMB having $20,000,000 was then made, though his recollection of the details of what was said at the seminar is, in some respects, poor:  he “can’t remember” how the project was to be funded.  Mr and Mrs Nothling also attended this same seminar.  They both denied being told that $20,000,000 of finance had been obtained.  Backo, it appears, was present at this seminar and, as I have said, did not give evidence.  I do not doubt that Colbran has made an honest attempt to recount what took place at the seminar.  But I am not prepared to find that an unqualified statement about finance to the extent of $20,000,000 having by then been arranged was made.  She is the only witness who suggests such a statement was made so early in the piece.  This seminar took place at a time when all respondents well knew that no progress had been made in identifying a source of any loan funds.  It took place at the time IMB put its business plan into the Council, from which it was abundantly clear that no finance had been arranged.  I think it unlikely that the respondents would have made or would have permitted staff to make an unqualified statement about finance at that early time.  Her evidence is also contradicted by the Nothlings and Fuhrmeister.  Colbran may have been unwittingly influenced by the fact that there was a good deal of publicity in the media about IMB, which included a number of statements purporting to come from IMB to the effect that it had a lender prepared to advance the first $20,000,000 needed for Stage 1 of the project in the fortnight before she gave her witness statement to the Commission.

1. The Commission’s witness Rutherford does not take the matter any further:  he gave evidence of a visit by Backo to the North Rockhampton Rugby League’s Club in about April 1993, during which Backo, in effect, conducted a sales seminar.  Rutherford said that Backo gave him the impression that Logan Lions had secured capital to fund the development.  But he said he only got that impression because of what Backo said about construction getting under way by Christmas 1993.

2. Matijasevic, who worked for IMB as a field interviewer/consultant from the end of June 1993 to the end of August 1993, said in his statement to the Commission of 4 October 1993 that some time in this period he was told by the respondents Musgrave, Stone, the Ivers brothers and other IMB management, that IMB had the $20,000,000 capital for the development. When he learned that Cowley had gone overseas to get the money, he realised that that was untrue. Matijasevic gave a statement to Stone himself dated 27 February 1996. He said in it he could recall being told by another IMB employee, Wilkinson, “and others whom I can’t now remember” that “we have the money”. He said he was not told anything further about it and simply assumed that that meant the initial $20,000,000 was in place, but the question was not discussed any further. He did not then identify the respondent Stone as one of those “others”, though he did that in his earlier statement to the Commission. In a supplementary statement to the Commission of 30 October 1996, he referred to this statement he had given to Stone in which he mentioned being told by Wilkinson during the period of his employment “we have the money”. He there gave a more elaborate account of this incident. He mentioned for the first time that he had this conversation with Wilkinson in the context of statements having been made at seminars to the effect that finance to fund the first stage of the development was available. He went on to say that he asked Wilkinson whether IMB had got the $20,000,000, to which she replied in the affirmative. Though I think Matijasevic is in general a reliable witness, I am not prepared to find that the respondents made representations that contravened s 52 to the effect that finance had been secured. I do not accept his evidence as going beyond establishing that Wilkinson told him privately at some time in the July/August period that finance had been secured.

3. I do not accept these Commission witnesses as establishing that during the period between June 1993 and September 1993 the first respondent, or anyone acting for it, made representations to the effect that finance of $20,000,000 had been obtained for the project.  But that is not the end of this issue.

4. The Commission witness Stokes gave explicit evidence that, at the seminar he attended on 16 September 1993, conducted for the purpose of persuading as many as possible of the eighty to one hundred people in attendance to purchase Legal & General policies, both the speaker he could not identify and Backo separately gave him the impression that IMB had secured a $20,000,000 bank assurance.  He said that:  “The speaker said it was announced at the launch at the Beenleigh Rum Distillery on 15 September 1993.”  There is no suggestion that Stokes attended the launch.  But Cowley and Agathonoff there made unqualified statements to the effect that finance in an amount of $20,000,000 had been obtained.  Stokes was not cross–examined on what he had to say about this.  Backo did not go into the witness box.

5. The Commission witness Webster attended an IMB/Logan Lions seminar a little before Stokes’ seminar, on 8 September 1993.  She spoke to a Logan Lions sale representative, Sue Bird, at the end of the seminar.  Webster said that the presenter she did not identify (though it was not David Ivers or Backo, both of whom she saw there at various times) made an unqualified statement that they had a particular amount of capital to construct the first stage of the project.  Though Webster could not recall the figure stated by the seminar presenter in this context, she was certain that “they gave a figure” and “they indicated they had the money”.  Webster rejected the suggestion in cross–examination that all that had been said at the seminar was that IMB had someone overseas at the moment and they were confident of getting a large sum of money as capital for the first stage of the development.

6. There is evidence coming from the respondents that supports what Stokes and Webster had to say in so far as on both 16 September 1993 and subsequently, various of the respondents made statements that $20,000,000 in finance had been arranged in circumstances in which it can be inferred that the respondents intended those statements to be accepted, though they were not made in the context of sales seminars.  In his letter of 16 September 1993 to Legal & General, in which he dealt with the TPC’s complaints, David Ivers said:

   “$20 million is available and in due course we can provide documentary evidence to this effect, subject to transactional documentation.”

7. His statement, that the money was available, is as unqualified as Cowley’s statement to the same effect made at the Logan Lions media launch the preceding day. It is highly likely, in view of the Ivers’ acknowledged suspicions about whether Cowley had indeed arranged finance, that David Ivers did not believe in the truth of this statement. But it is unnecessary to make any particular finding on the point since representations of the kind made to Stokes and Webster will contravene s 52 if they are misleading or deceptive, even though those responsible for making them honestly but erroneously believe in the truth of what was stated.

8. The Logan Lions Limited expression of interest submission to Logan City Council dated 19 November 1993 and signed by David Ivers and the ninth respondent, McLean, was in large part based on Cowley’s business plan of June 1993.  But it included some new material.  Item 2 of the submission is headed “Financial Viability”.  It directs the reader to “The Vienna Trust Merchant Bank Ltd. offer to finance”.  The copy of that document dated 9 November 1993 purporting to have been signed by the authorised officer and bearing the corporate seal of Vienna Trust Company Ltd affixed on 12 November 1993 purports to “confirm the availability of Loan funds to a gross US100,000,000” subject to certain conditions.  The document describes the loan as structured in “three separate approval drawdown stages” with Stage 1 being for “US$ 20 million (to take effect immediately subject to the conditions herein)”.  Whether the respondents had funding for the project was of importance to the Council.  Despite David Ivers’ denial, he, on behalf of IMB, was quite obviously putting this document before Council to show Council that they had the necessary funding in place, albeit funding that required IMB to satisfy the conditions set out in the letter.  This was put to the Council long after the directors of IMB, including Glenn Ivers, had become suspicious of Cowley, though it was only at the start of the trial that the respondents acknowledged that Cowley was a fraud and that this letter from the Vienna Trust Merchant Bank produced by Cowley was also fraudulent.

9. Finally, the Commission tendered a media release dated 24 September 1993 which named David Ivers as the person to contact “for more information”.  The tenor of this release is encapsulated in the opening statement:  “The Logan Lions Rugby League Club would go ahead despite action by the Trade Practices Commission last week, which resulted in the sacking of 77 staff.”  Ivers then wanted to convey to the public the message that the Commission had caused great harm to IMB.  The press release does that.  The release also contains the following statements:

   “David Ivers, Managing Director of the Lions’ marketing company, the IMB Group, said today that funding was already in place for construction of a multi–million dollar sporting complex in Logan City.

   ‘The project’s future has not been affected in any way by proceedings’, said Ivers.

   ‘The IFR Group in Melbourne has stated that it is prepared to provide the first $20 million needed for stage one of the project.

   ‘We also have the eighth largest bank in the world, First Assurety Capital Corporation of Idaho in the US, currently finalising a 100% performance bond with IMB’s bankers.  This means construction work will be able to go ahead as planned.’ Ivers said.”

10. This release was picked up by the Albert & Logan newspaper.  David Ivers does not suggest he took any action to correct what he claimed in evidence was the unauthorised preparation and dissemination of this media release by Nouveau Marketing, an organisation retained by IMB.  His denial of involvement in this media release is unconvincing.

11. I accept Stokes’ evidence on this issue in preference to that of Glenn Ivers, who conducted the seminar of 16 September 1993 and said he made a qualified statement only about the availability of finance.  I accept Webster’s evidence also.

12. I accept, on the basis of Stokes’ evidence, that a representation within par 30 of the current statement of claim was made on 16 September 1993 by the twelfth respondent in the presence of the fourth respondent on behalf of the first and third respondents at the IMB/Logan Lions sales seminar.  I also accept on the basis of Webster’s evidence that a similar representation was made in the presence of the fifth respondent at the seminar conducted on 8 September 1993.  I further find that the representations were made in order to induce people present at both seminars to purchase Legal & General policies from IMB and that the representations were misleading or deceptive because neither IMB nor Logan Lions had then been able to arrange any finance for the project.

    THE INVOLVEMENT IN THE CONTRAVENTIONS OF S 52 OF THE FOURTH TO TENTH AND THE TWELFTH RESPONDENTS

13. I have found that IMB contravened s 52 by representing on 8 and 16 September 1993 that finance had been approved for the first respondent’s development. I have also found that between July 1992 and September 1993, IMB contravened s 52 because representations were made on its behalf as to the commencement and completion of the development and as to its attributes and worth on completion. I have further found that in this same period of a little over a year, IMB also contravened s 52 because representations were made on its behalf as to the future value of the shares to be issued in the public company. The Commission contends that orders should be made against all the abovementioned respondents on the basis that each was directly or indirectly knowingly concerned in, or party to, each contravention within s 75B(1)(c) the TPA.

14. The respondents concede, in their closing submissions, that, with the exception of the ninth respondent, each of the abovementioned respondents was employed by the IMB Group and involved in the promotion and marketing of the IMB syndicate concept and the development proposal.  I have referred to the evidence which shows that between July 1992 and December 1993, each of the abovementioned respondents, apart from the ninth respondent, was paid each week a salary, fairly modest but not insubstantial, for the duties each performed for IMB.

15. The fifth respondent was a director of IMB and closely involved throughout in promoting its activities, which included participation in the selling of policies.  The twelfth respondent, though not an officer of IMB, probably because his bankruptcy prevented that, was, throughout the period, also closely involved in promoting these activities of IMB.  The fourth respondent, from the outset, was closely involved in promoting the first respondent’s activities, including the sale of its policies.

16. The other respondents, as well as the fourth respondent, were all directors of the third respondent, Logan Lions Limited. The third respondent was incorporated in June 1993 by those controlling the first respondent in order to further the first respondent’s scheme. Prior to that, they all took part in promoting or participating in IMB’s activities centred on selling policies. Some were more closely and continuously involved than others. That remained the position after incorporation of the third respondent until the end of 1993. The fourth and the sixth to tenth respondents, as directors of the third respondent, caused or at least allowed that company to be associated with the first respondent’s promotion of its scheme from June 1993 to the end of that year. Logan Lions was the company held out by the first respondent as that in which the shares the subject of IMB’s promotions was to be issued. The issue of those shares was an integral element of IMB’s promotional activities. Because of their actions as directors of the third respondent in allowing it to be associated by the first respondent in that way in the first respondent’s activities, I consider that each of the third respondent’s directors comes within s 75B(1)(c) the TPA in respect of each one of the contraventions I have found that the first respondent engaged in.

17. The ninth respondent differs from the other natural respondents in so far as he alone did not receive any remuneration from IMB.  Further, he, like a couple of the other respondents, lost money which he invested in IMB’s activities.  He suffered by far the largest loss of any of the respondents in this regard.  However, though he did not participate in the day–to–day activities of IMB, he played a role in advancing IMB’s business.  He attended, with other representatives of IMB, the meetings convened by Coopers & Lybrand on 13 November 1991 and by National Mutual on 3 December 1991.  He acknowledged that he attended three meetings of the board of IMB or meetings of senior management of IMB to discuss general matters of IMB’s business.  He took part with senior IMB representatives, including Glenn Ivers, in the interview with Cowley that led to IMB engaging him.  His participation in these management activities of IMB is, I think, sufficient to bring him within s 75B(1)(c) in respect of the contraventions I have found against IMB.  But his role as a director of Logan Lions is, of itself, sufficient to produce that result.

    RELIEF TO BE GRANTED

18. The Commission is entitled to declaratory relief in respect of the contraventions in which I have found all the respondents to be involved.

19. Orders are also sought that these respondents disclose to each person who has purchased a National Mutual or a Legal & General policy from IMB and to each person solicited by IMB to buy such a policy information as to the respects in which I have now found those respondents to have engaged in conduct in contravention of s 52 the TPA and also to publish an advertisement containing the same information.

20. I can see no justification for making these disclosure and corrective advertising orders.  Policies were sold by IMB to 3,200 people.  Many thousands more were unsuccessfully solicited by IMB to invest in such policies.  Whether it is now possible for the respondents to comply with the first of these proposed orders is extremely doubtful.  I would want to know something about that before contemplating making such an order.  In any event, the interest of those who bought policies through IMB in having the opportunity to cancel those policies has long ago been vindicated by the Commission by reason of the action it took against National Mutual and Legal & General and the action those two insurers subsequently agreed to take.

21. The Commission frankly states that it seeks this relief to let all those policyholders who have already supported the Supreme Court action mounted by the Ivers against the Commission, and also those policyholders who might contemplate supporting that action in the future, know that findings adverse to the respondents have been made in these proceedings.  I doubt that, to make the orders sought at the behest of the Commission for that purpose, ie, to assist the Commission rather than policyholders, is a proper use of the statutory powers.  But the declaratory relief to which I have held the Commission entitled vindicates, to some extent, the Commission’s decision to take action against the respondents.

22. The Commission also seeks injunctions restraining the respondents from engaging in the conduct found to have contravened the TPA. Such relief would not, I think, serve any purpose other than to vindicate the public interest in showing that certain of the respondents’ conduct contravened s 52 the TPA. In the circumstances of this case, the declaratory relief sought and which I propose to grant will adequately fulfil that purpose.

I certify that the preceding three hundred and twenty–seven (327) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Associate:

Dated:             17 May 2002

Counsel for the Applicant:	Mr G Thompson SC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First, Third to Twelfth Respondents:	Mr A Vasta QC
Dates of Hearing:	7, 8, 9, 14, 15, 16, 17, 22, 23, 24 September and 1 October 1998;  22, 23, 24, 25 February; 1, 2, 3, 4, 8, 9, 10, 11, 24 March; 13, 14, 15, 20, 21, 22, 23, 28 September; 4, 14, 18 October and 10 December 1999
Dates of Written Submissions:	17 December 1999; 24 January and 21 December 2000;  4, 24 April and 17 May 2001
Date of Judgment:	5 April 2002