Australian Competition and Consumer Commission v Michigan Group Pty Ltd

[2002] FCA 1439

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Michigan Group Pty Ltd (ACN 065 378 029) [2002] FCA 1439

TRADE PRACTICES – misleading or deceptive conduct – whether representation misleading or deceptive – onus of proof – onus depends on whether representor is natural or corporate person – corporate person must demonstrate reasonable grounds for representation – whether natural person knowingly concerned – onus and standard of proof – natural person bears no onus of proof as to representations made – relief sought – whether scope of relief sought is contemplated by the Act

Trade Practices Act 1974 (Cth) ss 51, 51A, 52, 58, 59, 75B, 80, 84, 87, 163A
Federal Court of Australia Act 1976 (Cth) s 21

Trade Practices Commission v Friendship Aloe Vera Pty Ltd (1988) ATPR 40-892 referred to
ACCC v The Shell Company of Australia Ltd (1997) 72 FCR 386 referred to
ACCC v Giraffe World Australia Pty Ltd (1998) 84 FCR 512 referred to

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v MICHIGAN GROUP PTY LTD (ACN 065 378 029), RODNEY MONTAGUE LASKI, CHARLES CAMERON, IMOBILIARE PTY LTD (ACN 063 501 208), PETER SEMOS, GEORGE SEMOS, DARYL FRANCIS DOHERTY, YEPPOON PTY LTD (ACN 081 944 112), LINDA CAROL MORETTO AND PROSPERO FRANZESE

Q 105 OF 2000

DOWSETT J
26 NOVEMBER 2002
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 105 OF 2000

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

MICHIGAN GROUP PTY LTD (ACN 065 378 029)
FIRST RESPONDENT

RODNEY MONTAGUE LASKI
SECOND RESPONDENT

CHARLES CAMERON
THIRD RESPONDENT

IMOBILIARE PTY LTD (ACN 063 501 208)
FOURTH RESPONDENT

PETER SEMOS
FIFTH RESPONDENT

GEORGE SEMOS
SIXTH RESPONDENT

DARYL FRANCIS DOHERTY
SEVENTH RESPONDENT

YEPPOON PTY LTD (ACN 081 944 112)
EIGHTH RESPONDENT

LINDA CAROL MORETTO
NINTH RESPONDENT

PROSPERO FRANZESE
TENTH RESPONDENT

JUDGE:

DOWSETT J

DATE OF ORDER:

26 NOVEMBER 2002

WHERE MADE:

BRISBANE

TABLE OF CONTENTS

INTRODUCTION
THE CLAIMS
EVIDENCE FROM INVESTORS

Graeme Raymond Ellis
John Edward Carter
Adrian Michael Harman
Elisabeth Lasser
Adrian Domenik Scipione
Ray Turton
Leon William Kirkwood and Dianne Forsyth Kirkwood
Tom Nemes
Arjan Dewan
Siva Ratnasabapathy Kumar
Bryan Martin Egan
Won Hwan Kwon
Gordon John Poole
John Keith Rotheram

EVIDENCE CONCERNING THE SITES

Franklins

Anthony George Cassone
Timothy Don-Hugh Mak
Gregory Scott Tierney
Clem Evan Hodgman
Roger Willoughby

Franklins’ employees - Summary
Duffy Brothers

Natale Pisciuneri

Coco’s

Peter McPhee

Metcash Trading Ltd (Davids)

Andrew Reitzer

Foodland

Arthur Edward Trindall

Waterside Fruit Connection

Louie George Poniris

SPAR

Peter Joseph
Ugo Sirianni

Coles Supermarkets

Colin Budden

Summary

EVIDENCE FROM, OR ON BEHALF OF THE RESPONDENTS

Rodney Montague Laski

Mr Laski’s affidavit

Mr Ellis
Mr Carter
Mr Harman
Ms Lasser
Mr Scipione
Mr Turton
Mr and Mrs Kirkwood
Mr Nemes
Mr Dewan
Mr Kumar
Mr Egan
Mr Kwon
Mr Poole
Mr Rotheram

Mr Laski’s oral evidence

Prospero Franzese
Daryl Francis Doherty

Ms Lasser
The Kirkwoods
Mr Dewan
Mr Kumar
Mr Egan

Other matters

CONCLUSIONS

Agency
Some common themes

Siting representations
“Your Profit Potential” documents

Guarantees
The availability and price of oranges
Representations as to bottle sales and profits
Reasonable grounds for the purposes of s 51A
The respondents

Michigan
Queensland Juice Company
Mr Laski
Mr Semos
Mr Doherty
Mr Cameron
Yeppoon and Ms Moretto

Sites

Franklins:
Duffy Brothers:
Coco’s:

SPAR

The investors

Mr Ellis
Mr Carter
Mr Harman
Ms Lasser
Mr Scipione
Mr Turton
Mr and Mrs Kirkwood
Mr Nemes
Mr Dewan
Mr Kumar
Mr Egan
Mr Kwon
Mr Poole
Mr Rotheram

ORDERS

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 105 OF 2000

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

MICHIGAN GROUP PTY LTD (ACN 065 378 029)
FIRST RESPONDENT

RODNEY MONTAGUE LASKI
SECOND RESPONDENT

CHARLES CAMERON
THIRD RESPONDENT

IMOBILIARE PTY LTD (ACN 063 501 208)
FOURTH RESPONDENT

PETER SEMOS
FIFTH RESPONDENT

GEORGE SEMOS
SIXTH RESPONDENT

DARYL FRANCIS DOHERTY
SEVENTH RESPONDENT

YEPPOON PTY LTD (ACN 081 944 112)
EIGHTH RESPONDENT

LINDA CAROL MORETTO
NINTH RESPONDENT

PROSPERO FRANZESE
TENTH RESPONDENT

JUDGE:	DOWSETT J
DATE:	26 NOVEMBER 2002
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. This judgment is divided into the following parts:

   ·INTRODUCTION

   ·THE CLAIMS

   ·EVIDENCE FROM INVESTORS

   ·EVIDENCE CONCERNING THE SITES

   ·EVIDENCE FROM, OR ON BEHALF OF THE RESPONDENTS

   ·CONCLUSIONS

   ·ORDERS

   INTRODUCTION

2. The applicant (“ACCC”) seeks injunctive and other relief pursuant to the Trade Practices Act 1974 (Cth) (the “Act”) against various respondents. The first respondent (“Michigan”) is in liquidation and so no relief is now sought against it. The second respondent (“Mr Laski”), the fifth respondent (“Mr Peter Semos”), the sixth respondent (“Mr George Semos”) and the seventh respondent (“Mr Doherty”) all appeared in person at various stages during the proceedings. The third respondent (“Mr Cameron”) has not appeared, either in the action or at the trial. The ninth respondent (“Ms Moretto”) is in prison and has similarly not appeared. Proceedings have been discontinued as against the tenth respondent. Mr Peter Semos was given leave to appear on behalf of the fourth respondent which traded under the name Queensland Juice Company and is hereafter so described. He was a director of that company. Ms Moretto was a director of the eighth respondent (“Yeppoon”) which also has not appeared. At all relevant times Mr Laski was a director of Michigan. ACCC eventually abandoned any claim to relief as against Mr George Semos.

3. ACCC alleges that from some time in early 1998 until some time in early 2000, Michigan promoted a scheme involving the distribution of orange juicing machines.  It is alleged that the other respondents all participated in some way in the promotion of that scheme.  Without wishing to pre-empt any findings in the matter, I observe that Mr Laski seems to have been in control of Michigan.  That company was to acquire juicing machines for sale to investors.  The machines were to be located in existing retail outlets at no cost to the retailers.  The retailer was to assume responsibility for operating the machine and was expected to purchase bottles and caps from the relevant investor.  The profit on such sale was to be the investor’s return on his or her investment.  The retailer was to profit from the sale of orange juice.  Although it is not entirely clear, Michigan may have actually acquired machines from Queensland Juice Company or Mr Peter Semos who effectively controlled the latter company.  There is mention in the evidence of another Michigan company, but no relevant distinction was drawn between its actions and those of Michigan.  Queensland Juice Company was to find commercial sites in which to install the machines and then install them.  Mr George Semos worked for Queensland Juice Company or for Mr Peter Semos.   Mr Cameron worked for Michigan.  Mr Doherty worked for Michigan or for Mr Cameron.  On 8 April 1999 Yeppoon was appointed by Michigan to be Queensland distributor of the orange juicing machines.  Ms Moretto apparently controlled its activities.

4. ACCC alleges that the corporate respondents have breached ss 52, 53, 58 and 59 of the Act and that the respondents who are natural persons were involved in such breaches. The breaches were allegedly constituted by various representations made by one or more of the respondents to one or more of the investors or, in the case of alleged breaches of s 58, by the receipt of money.

   THE CLAIMS

5. Paragraph 22 of the statement of claim is as follows:

   From about early 1998, the Respondents promoted and participated in a scheme whereby:

   (a)persons (‘the investors’) would purchase a business (‘the business’) including one or more commercial orange juicing machines (‘the machines’) from (Michigan);

   (b)(Queensland Juice Company) would import parts for the machines and would assemble the machines in Australia;

   (c)(Queensland Juice Company) would sell the machines to (Michigan);

   (d)the machines would be installed in nominated retail fruit outlets arranged by (Michigan) or alternatively (Queensland Juice Company);

   (e)(Michigan) or alternatively (Queensland Juice Company) would have a representative of the retail fruit outlets sign a standard form Machine Supply Site Agreement;

   (f)(Michigan) or alternatively (Queensland Juice Company) would arrange for labels to be manufactured and placed on 2-litre plastic bottles, showing the retail fruit outlet concerned;

   (g)the investors would purchase the labelled 2-litre plastic bottles (‘the bottles’) from (Michigan) or alternatively (Queensland Juice Company) at a price, in the case of some investors of $0.50 per bottle and, in the case of other investors $1.00 per bottle;

   (h)(Queensland Juice Company) would train the staff of the retail fruit outlet in the operation of the machines on site;

   (i)(Queensland Juice Company) would provide maintenance of the machines on site for a period of 12 months;

   (j)the investors would on-sell the bottles to the retail fruit outlets at $1.50 per bottle, thereby making profits;

   (k)the retail fruit outlets would supply oranges and use the machines and the bottles to sell freshly squeezed orange juice to their customers in-store;

   (l)persons (‘the distributors’) would purchase a business (‘the distribution business’) from (Michigan);

   (m)the distributors would sell the machines to the investors within the respective distributor’s allocated exclusive territory, and would receive part of the price of the bottles sold to the investors within the territory, by (Michigan) or alternatively (Queensland Juice Company), thereby making profits.

6. Broadly speaking, the relevant representations appear in par 23 of the statement of claim.  They are identified below in slightly paraphrased form.  The identifying lower case letters relate to the relevant subparagraphs of par 23.  The representations were that:

   (a)Michigan, or alternatively Queensland Juice Company had agreements with large supermarket chains such as Franklins for the use by those supermarket chains of the machines;

   (b)Michigan had formed an alliance with some of the major supermarket chains in Australia for the use by those supermarket chains of the machines;

   (c)Michigan, or alternatively Queensland Juice Company had a two year contract with Franklins for the use by Franklins of the machines;

   (d)Michigan, or alternatively Queensland Juice Company had a contract with Franklins for a period of twelve months for the use by Franklins of the machines, at the end of which period the contract would be renewed;

   (e)Michigan, or alternatively Queensland Juice Company had entered into an agreement with Franklins for use of the machines by supermarkets in Asia associated with Franklins;

   (f)Michigan, or alternatively Queensland Juice Company had an agreement with Franklins for the use by Franklins of the machines in Franklins Fresh stores and Big Fresh stores;

   (g)Michigan, or alternatively Queensland Juice Company had an agreement with Franklins for the use by Franklins of the machines in Franklins stores in Queensland;

   (h)Michigan, or alternatively Queensland Juice Company had a contract with Franklins for the use by Franklins of the machines in all Franklins Big Fresh stores;

   (i)Queensland Juice Company had an agreement, arrangement or affiliation with Franklins Big Fresh for the use by Franklins Big Fresh of the machines;

   (j)Michigan, or alternatively Queensland Juice Company had contracts with approximately forty Franklins Big Fresh stores for the use by those stores of the machines;

   (k)Queensland Juice Company had an agreement, arrangement or affiliation with Davids for the use by Davids of the machines;

   (l)Michigan, or alternatively Queensland Juice Company had an agreement with Duffy Brothers for the use by Duffy Brothers of the machines;

   (m)Michigan, or alternatively Queensland Juice Company had entered into an agreement with the SPAR supermarket chain for the use by that supermarket chain of the machines;

   (n)Michigan, or alternatively Queensland Juice Company had an agreement with the Coco’s store chain for the use by that chain of the machines;

   (o)Michigan, or alternatively Queensland Juice Company would be entering into an agreement with Coles for the use by Coles of the machines;

   (p)Michigan, or alternatively Queensland Juice Company had an agreement with Coles for the use by Coles of the machines;

   (q)some Coles stores were selling 120 of the bottles per day;

   (r)Queensland Juice Company had an agreement, arrangement or affiliation with Coles for the use by Coles of the machine;

   (s)Michigan, or alternatively Queensland Juice Company had an arrangement with Woolworths and Coles for the use by Woolworths and Coles of the machines in their stores in 2000;

   (t)Michigan, or alternatively Queensland Juice Company was negotiating with Woolworths and Coles for the use by Woolworths and Coles of the machines;

   (u)the alliance with some of the supermarket chains in Australia would ensure a constant supply of new sites at which the machines could be installed;

   (v)supermarkets could be relied upon as a source of new and ongoing business for the distributors;

   (w)Michigan, or alternatively Queensland Juice Company had secured arrangements with major retailers throughout Australia for the use by those persons of the machines;

   (x)Michigan, or alternatively Queensland Juice Company had arrangements with large fruit and vegetable stores for the use by those stores of the machines;

   (y)Michigan, or alternatively Queensland Juice Company had arrangements with many very high volume independent stores for the use by those stores of the machines;

   (z)the machines were state-of-the-art;

   (aa)the machine could be cleaned in eight to ten minutes and did not need to be pulled apart for cleaning;

   (bb)the machines had been health and safety checked;

   (cc)very little work or time commitment would be required of investors to operate the business;

   (dd)impliedly, that investors could, or could to a considerable extent, conduct the business from the investor’s place of residence;

   (ee)that prime sites would sell far more than 300 of the bottles per week in respect of each of the machines;

   (ff)the business would earn income for the investors on a full-time basis;

   (gg)the business would earn an income for the investors from day one;

   (hh)the potential income that the investors would earn from the business would be in accordance with the following figures:

Number of bottles sold in a day	20	30	40	50
Your profit per machine per day	$20.00	$30.00	$40.00	$50.00
Your profit over 5 machines per day	$100.00	$150.00	$200.00	$250.00
Your profit over 7 days	$700.00	$1,050.00	$1,400.00	$1,750.00
Your profit per year	$36,400.00	$54,600.00	$72,800.00	$91,000.00
% return on your investment	72%	91%	121%	150%

(ii)a good site could get two or three times the sales specified in the top of the range in the following figures:

Number of bottles sold in a day	20	30	40	50
Your profit per machine per day	$20.00	$30.00	$40.00	$50.00
Your profit over 5 machines per day	$100.00	$150.00	$200.00	$250.00
Your profit over 7 days	$700.00	$1,050.00	$1,400.00	$1,750.00
Your profit per year	$36,400.00	$54,600.00	$72,800.00	$91,000.00
% return on your investment	72%	91%	121%	150%

(jj)the potential income that the investor would earn from the business would be in accordance with the following figures:

Number of bottles sold in a day	20	30	40	50
Your profit per machine per day	$20.00	$30.00	$40.00	$50.00
Your profit over 5 machines per day	$100.00	$150.00	$200.00	$250.00
Your profit over 7 days	$700.00	$1,050.00	$1,400.00	$1,750.00
Your profit per year	$36,400.00	$54,600.00	$72,800.00	$91,000.00
% return on your investment	56%	84%	112%	140%

(kk)the potential income that the investors would earn from the business would be in accordance with the following figures:

Number of bottles sold in a day	40	60	80
Your profit per machine per day	$20.00	$30.00	$40.00
Your profit over 5 machines per day	$100.00	$150.00	$200.00
Your profit over 7 days	$700.00	$1,050.00	$1,400.00
Your profit per year	$36,400.00	$54,600.00	$72,800.00

(ll)the potential income that the investor would earn from the business would be in accordance with the following figures:

Per 5 Machines
Number of bottles sold in a week	350	450	550	650	750
Profit in a week	$875	$1,125	$1,375	$1,625	$1,875
Profit in a month	$3,500	$4,500	$5,500	$6,500	$7,500

(mm)the potential income that the investor would earn from the business would be in accordance with the following figures:

$ Value Return on 30 Machines
Per week	$9,720
Per month	$41,796
Per annum	$501,552

(nn)the potential income that the investor would earn from the business would be in accordance with the following figures:

Number of bottles sold in a day	20	40	60
Your profit per machine per day	$10	$20	$30
Your profit over 5 machines per day	$50	$100	$150
Your profit over 7 days	$350	$700	$1050
Your profit per year	$18,200	$36,400	$54,600
Based on 20 machines	$364,000	$728,000	$1,090,200

(oo)the investor could make a profit of $500.00 or more per week from each of the machines;

(pp)other investors had made a profit of $500.00 or more per week from each of the machines;

(qq)some of Michigan’s trial sites for the machines had sold over 100 of the bottles in one day of trading;

(rr)other investors were making $1,000.00 per month;

(ss)the expected volume from a grade “A” site was 720 of the bottles each two weeks, and anything in the range of 300 to 400 of the bottles per week;

(tt)Michigan, and further or alternatively Queensland Juice Company was positive the machines would sell 200 of the bottles per week;

(uu)certain retail fruit outlets at which the machines would be sited would sell a minimum of 200 of the bottles per week;

(vv)certain retail fruit outlets at which the machines would be sited would sell a minimum of 500 of the bottles per week;

(ww)investors in Queensland were earning income from the business in accordance the following figures:

Number of bottles sold in a day	40	60	80
Your profit per machine per day	$20.00	$30.00	$40.00
Your profit over 5 machines per day	$100.00	$150.00	$200.00
Your profit over 7 days	$700.00	$1,050.00	$1,400.00
Your profit per year	$36,400.00	$54,600.00	$72,800.00

(xx)one of the machines sited in Queensland was averaging sales of 400 of the bottles per week;

(yy)investors in New South Wales would sell at least 60 to 100 of the bottles per week;

(zz)some sites were selling over 100 of the bottles in a busy day;

(aaa)some sites were selling over 500 of the bottles in a busy week;

(bbb)other investors were selling in excess of 500 of the bottles per week;

(ccc)on average the machines of current investors were selling 70 to 80 of the bottles per day;

(ddd)some sites were selling more than 40 of the bottles per day;

(eee)some sites were selling more than 60 of the bottles per day;

(fff)some sites in Queensland were selling 100 of the bottles per day;

(ggg)one of the machines was in use at the Darling Harbour Fish Markets and was selling 120 of the bottles per day on some days;

(hhh)poor to average stores sold 350 to 400 of the bottles per week and good to excellent stores could sell 800 to 1,000 of the bottles per week;

(iii)a small scale store would sell a couple of hundred of the bottles per week;

(jjj)there was about 40 per cent to 50 per cent profit in being an investor;

(kkk)there was a lot of money to be made from the distribution business;

(lll)the potential for sale by the distributor for New South Wales was well over 300 of the machines, with the distributor’s profit being $600,000.00;

(mmm)the potential for sales by the distributor for Victoria was well over 200 of the machines, with the distributor’s profit being $400,000.000;

(nnn)the distributor for New South Wales would make a profit of $2,000.00 on each of the machines sold in that state, or $10,000.00 for every territory of five of the machines, sold by the distributor;

(ooo)the distributor for Victoria would make a profit of $3,000 on each of the machines sold in that state, or $10,000 for every territory of five of the machines, sold by the distributor;

(ppp)the supply of oranges for juicing by use of the machines would be maintained throughout the entire calendar year;

(qqq)the business concept was sound;

(rrr)there was an investor who had already purchased ten (10) of the machines;

(sss)one investor had purchased 100 of the machines at the Franchise and Investment Expo at the Sydney Convention and Exhibition Centre, Darling Harbour held during March 1999;

(ttt)well over 100 of the machines had been sold at the Brisbane Expo and about 140 of the machines as a result of the Sydney Expo;

(uuu)Michigan, or alternatively Queensland Juice Company had around 100 of the machines sited in Queensland;

(vvv)there was a warehouse facility available at Homebush, New South Wales, for use by investors for storage of the bottles prior to delivery to retail fruit outlets;

(www)investors could expect to make well in excess of the written profit projections;

(xxx)the machines being offered to investors would be installed and operational at nominated or agreed retail fruit outlet sites within short periods thereafter;

(yyy)the machines that had been purchased by investors had been installed at nominated or agreed retail fruit outlets;

(zzz)Coles had sought to enter into an agreement with Michigan or alternatively Queensland Juice Company in relation to the use by Coles of the machines;

(aaaa)impliedly, that the business being sold to the investors, including the machines, involved an established and tested business concept or system, which had already proven to be successful for other investors.

1. Paragraphs 24, 25 and 26 of the pleading are as follows:

   24.Insofar as the representations referred to in paragraph 23 of this pleading were representations as to future matters, the Respondents impliedly represented that there were reasonable grounds for making those representations.

   25.By the representations referred to in paragraph 23 of this pleading, the Respondents invited persons to engage or participate in a business activity requiring the investment of moneys and the performance by them of work associated with the investment.

   26.In reliance upon the representations referred to in paragraph 23 of this pleading and induced thereby, persons made payments or gave other consideration to (Michigan) or alternatively (Queensland Juice Company) or alternatively (Yeppoon) for the purchase of the businesses, the purchase of the distribution businesses, the supply of the machines, the supply of the bottles, and the provision of services associated with the machines and the provision of services associated with the bottles, namely those services referred to in paragraph 22 of this pleading, which payments or consideration were accepted by (Michigan) or alternatively (Queensland Juice Company) or alternatively (Yeppoon).

2. The extreme diversity of the pleading reflects the fact that ACCC impugns the conduct of one or more respondents in dealing with no fewer than fourteen different investors (treating Mr and Mrs Kirkwood as one investor). The circumstances surrounding each investment were unique to it. The factual bases of the claims against the various respondents also differ. In the original application, ACCC primarily claimed relief of the protective kind, designed to restrain or avoid future breaches of the Act and/or to facilitate public warnings as to the respondents’ activities. However par 7 of the prayer for relief sought:

   Findings pursuant to section 83 of the Trade Practices Act 1974 (Cth) of the facts that constitute the respects in which the conduct of the Respondents referred to in the Statement of Claim is in contravention of the provisions of Part V of the Trade Practices Act 1974 (Cth).

3. It emerged in the course of the hearing that although the relief sought was of the protective kind, ACCC had in mind the possibility that it might subsequently seek compensation on behalf of investors pursuant to subss 87(1A) and (1B) of the Act, relying in any such claim upon the provisions of s 83 of the Act. Section 87 of the Act, as it was prior to the amendments made by the Trade Practices Act Amendment Act (No 1) 2001 (Cth), provided as follows:

   (1)…

   (1A)Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA, IVB or V or on the application of the Commission in accordance with subsection (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.

   (1B)Where, in a proceeding instituted for an offence against section 79 or instituted by the Commission or the Minister under section 80, a person is found to have engaged (whether before or after the commencement of this subsection) in conduct in contravention of a provision of Part IVA, IVB or V, the Commission may make an application under subsection (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made.

   (1C)An application may be made under subsection (1A) in relation to a contravention of Part IVA, IVB or V notwithstanding that a proceeding has not been instituted under another provision of this Part in relation to that contravention.

   (1CA)  An application under subsection (1A) may be commenced:

   (a)in the case of conduct in contravention of Part IVA—at any time within 2 years after the day on which the cause of action accrued; or

   (b)in any other case—at any time within 3 years after the day on which the cause of action accrued.

   (1D)For the purpose of determining whether to make an order under this section in relation to a contravention of Part IVA, the Court may have regard to the conduct of parties to the proceeding since the contravention occurred.

   (2)      The orders referred to in subsection (1) and (1A) are:

   (a)an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order;

   (b)an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified;

   (ba)an order refusing to enforce any or all of the provisions of such a contract;

   (c)an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage;

   (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;

   (e)an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his or her own expense, to repair, or provide parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage;

   (f)an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his or her own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage; and

   (g)an order, in relation to an instrument creating or transferring an interest in land, directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to execute an instrument that:

   (i)varies, or has the effect of varying, the first-mentioned instrument; or

   (ii)terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first-mentioned instrument.

   …

4. Section 83 provides:

   In a proceeding against a person under section 82 or in an application under subsection 87(1A) for an order against a person, a finding of any fact by a court made in proceedings under section 77, 80, 80A or 81, or for an offence against section 79, in which that person has been found to have contravened, or to have been involved in a contravention of, a provision of Part IV, IVA, IVB or V is prima facie evidence of that fact and the finding may be proved by production of a document under the seal of the court from which the finding appears.

5. In the course of the hearing, ACCC amended its prayer for relief to that which now appears in exhibit 13.  By reference to that exhibit and to the statement of claim, it can be seen that the first prayer as against each of the respondents is for “findings/declarations” concerning the misrepresentations allegedly made to the various investors.  There are seventy-nine different representations allegedly made to fourteen investors (again treating Mr and Mrs Kirkwood as one investor).  Although there were common themes in the representations, there were also differences.  Not all representations were made by all respondents.  In some cases legal responsibility for representations will depend upon issues of agency.

6. Causes of action involving numerous claimants are by no means unknown to the law.  Techniques have been developed to deal with them including, in particular, the class action.  Those techniques focus on common issues with a view to resolving them in a way which will be binding on all parties.  Issues peculiar to individual claimants may then be resolved separately.  This approach assumes substantial common issues.  Superficially, there are common issues in the investors’ claims.  They are principally:

   ®the apparent similarity of the representations made to different claimants by one or other of the respondents; and

   ®the accuracy or otherwise of certain common themes in those representations.

7. However, when one looks more closely at the evidence, these “similarities” are shown to be illusory.  This is for two main reasons.  Firstly, all potential claims will involve allegations of loss as a result of reliance upon representations which were essentially untrue.  In any proceedings seeking compensation for such loss, the extent to which each claimant’s state of mind concerning the relevant investment was formed in reliance upon the impugned conduct will be the key to recovery.  That will involve an assessment of the conduct of the representors in the context in which it occurred.  That representations in broadly similar terms were made to different investors will not necessarily lead to the conclusion that each investor relied upon such representations in the same way, to the same extent or at all.  In the present case, for example, many investors received documentary representations in identical or very similar forms.  In most, if not all cases, these representation were followed up by other, more specific representations.  In all probability the earlier, and arguably common, representations ceased to operate on the decision-making process of the particular investor when the more specific representations were made.  This was not a case in which each investor merely responded to the same advertisement.  There was substantial personal contact between each of them and one or more of the respondents, involving oral representations which were unique in each case.  Secondly, it is at least possible that some of the representations were misleading when made to some investors but not when they were made to others.

8. Some examples of the differences in the positions of the various investors are:

   ®Mr Rotheram, on any view of the evidence, purchased his machines from Queensland Juice Company and not from Michigan, although he had previously agreed to acquire machines from Michigan.  The change in arrangement was brought about by a secret transaction between him and Mr Semos.  He can hardly have relied upon representations made as to the arrangements made by Michigan for the siting of machines purchased from it.

   ®Mr Ellis acquired distribution rights for the juicing machines, swapping those rights for an interest which he had, pursuant to an agreement with Michigan, in the marketing of slush (iced drink) machines.  He agreed to the swap because he was dissatisfied with the slush machine business and saw the juicing machine business as a better prospect.  He was clearly aware of the uncertain nature of the arrangements with retailers for the siting of the orange juicing machines.  Allegedly misleading representations as to such arrangements were important in inducing other investors to enter the Michigan scheme.

   ®Mr Carter purchased six machines for a total investment of $71,940.  All six were sited, and Mr Carter appears to have been quite satisfied with his investment until the price of oranges rose unexpectedly.  It will be difficult for Mr Carter to rely, in any compensation claim, upon misrepresentations as to siting arrangements.

   ®Ms Lasser deliberately chose not to deal with Michigan and understood that she was acquiring her machines from Mr Semos and/or Queensland Juice Company.  This was because either Mr Doherty (on Ms Lasser’s version) or Ms Lasser (on Mr Doherty’s version) had learnt something unfavourable about Mr Laski.  Either Ms Lasser decided not to deal with him or his company or Mr Doherty decided that he did not wish to do so.

   ®Neither Ms Lasser nor Mr Kwon received documentary representations.

   ®Mr Nemes was an undischarged bankrupt and apparently proposed to trade through a company, NTD Constructions Pty Ltd.  He was not a director of that company, presumably because of his position as an undischarged bankrupt.  No director was called.  Mr Nemes referred to it as “his” company.  Nonetheless one would think that there would be issues concerning reliance arising out of this anomalous situation. 

9. Clearly, ACCC’s purpose in seeking findings/declarations is related to proceedings which may be commenced in the future, seeking compensation on behalf of investors, and not to any present claim to protective relief. That relief includes injunctions, orders for the publication of notices and orders that the natural persons who are respondents undertake education and training courses concerning compliance with the Act. The injunctive relief seems to go beyond what might be thought reasonable in order to demonstrate that the respondents had contravened the Act and to protect the public from similar misconduct. Injunctions are sought to restrain quite specific conduct which could easily be avoided by anybody who was intent upon continuing to market this scheme. One would have thought it better to identify the common elements of the representations and to frame the injunctive relief upon a more general basis. A member of the public could only be confused by such a plethora of legalese as is presently sought. I suspect that the injunctive relief has been tailored to give apparent support to the prayer for declaratory relief.

10. There is no express power in the Act to grant declaratory relief of the kind here sought. However, s 21 of the Federal Court Act 1976 (Cth) (the “Federal Court Act”) confers a general power to make binding declarations of right.  Such relief would not generally be granted under the general law if the only purpose in seeking it was its possible use in other anticipated proceedings.  Various policy considerations militate against such a course.  For present purposes, the most compelling is that it cannot be said with certainty that any of these declarations will ever be put to any valuable use.  It is not certain that claims for compensation will be made on behalf of any of the various investors.  Even if such a claim is made, it is unlikely that all of the representations which have been alleged by any one investor will have to be proven on the balance of probabilities.  As I have previously observed, a claim for compensation will focus upon those matters which induced a particular investor to part with his or her funds.  It is likely that in many cases, earlier representations will have been overtaken by later, more specific representations.  This is particularly true of the various documentary representations. 

11. Had the investors sought to recover compensation they may have done so by way of class action, assuming sufficient common issues.  I doubt whether there are sufficient common issues to justify a class action.  The facts surrounding arrangements made by Michigan and/or Queensland Juice Company with various retailers would have been common, but that is a relatively small part of the case.  Some common documentation was used, but it is by no means clear that such documentation constituted a major incentive for some or all investors to enter into the scheme.  This case is really made up of fourteen claims, each based primarily upon dealings between one or more respondents and each of the investors.  In other words, fourteen different claims have been joined in the same proceedings.  This has been done under the guise of a claim for injunctive relief which is, of course, designed, not to protect those who have already entered the scheme, but those who have not. 

1. It is appropriate for ACCC to seek to demonstrate that past misconduct has contravened the Act and to obtain orders which will assist it in preventing future misconduct and in warning the public. However such relief would have been designed to identify and prohibit the substance of the alleged misrepresentations rather than the various forms in which it was made to particular investors.

2. ACCC may have considered that it was not asking the Court to do any more than it would have had to do in the sum total of the fourteen cases.  This is incorrect.  In determining whether or not an individual investor had acted in reliance upon a representation, it would not have been necessary to determine whether every conceivable representation made to that investor was established on the balance of probabilities.  It would only have been necessary to determine whether or not it was possible to infer from the whole of the evidence that particular factual representations had been made and acted upon by the investor. 

3. It is likely that the structure of the case made it more difficult for the respondents than was necessary.  A respondent faced with the prospect of an extended trial, involving many claims against numerous respondents, may well decide that he or she cannot afford to be represented.  None of the respondents in this case was represented at the trial.  On the other hand, a respondent faced with a case concerning his or her own involvement in the matter may be able to afford the cost of a much shorter trial.  The decision as to legal representation may also be affected by the relief sought.  Where no substantial financial relief or penalty is sought against a respondent, he or she might well choose not to incur the costs of such representation.  For this reason, too, the course adopted by ACCC in this case was undesirable.

4. Numerous other difficulties arose in the course of this trial, resulting from the unfortunate joinder of causes of action, but it is not necessary to go into them in detail.  I should say that as the difficulties emerged, counsel for ACCC tried very hard to assist, but in the end, it was beyond even their substantial experience.  I received very little assistance in terms of marshalling the evidence to reflect the cases of the various investors or to demonstrate the ways in which evidence concerning one investor or one respondent might affect other aspects of the case.  Having tried to so marshal the facts myself, I entirely understand why they chose not to do so.  It is not always possible to reduce fundamentally flawed proceedings to a form in which they can be resolved in accordance with received views and expectations as to the integrity of the judicial process.  I should also say that I accept some responsibility for these unfortunate circumstances.  Had I acquired a deeper understanding of the case in the course of its management prior to trial, I would have taken steps to resolve the problem.

5. The point of all of this is simply that ACCC should not have sought to conduct proceedings designed to advance individual claims under the guise of seeking quite different forms of relief. Had the matter been identified as a series of claims for compensation by, or on behalf of investors, the difficulties would have been obvious and appropriate orders made at an early stage. This was not done because the proceedings appeared to be something other than that which they were. The problem has arisen because ACCC has tried to make ss 83 and 87 do rather more than they were intended to do. Parliament certainly contemplated that there would be issues resolved in proceedings brought by ACCC which would be relevant in subsequent claims brought by, or on behalf of persons who suffered loss as a result of the conduct in question. However I do not accept that it was intended that ACCC should simply run a large number of quite separate proceedings under the guise of seeking more general relief. I do not mean to imply any misconduct by ACCC. I have no doubt that it was motivated by a desire to do its duty, both towards the public and towards individual investors. However the course which was adopted was, in the circumstances of this case, inappropriate.

6. ACCC may have been influenced in its conduct of these proceedings by a line of cases which includes the decision of Pincus J in Trade Practices Commission v Friendship Aloe Vera Pty Ltd (1988) ATPR 40-892, that of Drummond J in ACCC v The Shell Company of Australia Ltd (1997) 72 FCR 386 and that of Lindgren J in ACCC v Giraffe World Australia Pty Ltd (1998) 84 FCR 512. Those cases established that ACCC may not commence proceedings on behalf of other persons pursuant to subs 87(1B) until a determination has been made that the respondent had contravened a relevant provision of the Act. Drummond J held that ACCC could not, in an initiating application for relief other than relief pursuant to s 87, seek relief pursuant to subs 87(1B) in anticipation of its establishing a relevant contravention. Although I appreciate the textual justification for that view, I consider that the application and subsequent pleadings in a case are primarily designed to give notice to the respondent of the case which he or she must meet. I would have thought that ACCC might properly indicate in those documents that should a relevant contravention be established, a claim would be made pursuant to subs 87(1B).

7. Given these difficulties it is necessary to determine how I should proceed.  These proceedings are primarily for declaratory and injunctive relief.  Whilst the power to grant an injunction pursuant to Part VI is arguably wider than is the power under the general law (see in particular subss 80(4) and (5)), it is still discretionary, as is any power to make a declaration.  A court will not generally make such orders unless they will serve some useful purpose.  ACCC does not demonstrate such a purpose merely by indicating a possible future claim for compensation on behalf of investors.  I have some doubts as to the availability of much of the relief sought in exhibit 13.  I will deal with that matter at a later stage.  Whilst injunctive relief of some kind may be appropriate, it is difficult to see any value in those presently sought.  In the circumstances it may be better to consider the facts of the case, making appropriate findings.  I will then adjourn the matter to enable the parties to make appropriate submissions as to relief.  In considering the evidence, however, I propose to be selective, identifying those aspects which may be arguably relevant for the purposes of this action as presently constituted.  However I will also keep in mind the possibility of subsequent claims for compensation.

   EVIDENCE FROM INVESTORS

8. This evidence identifies the conduct which is the subject matter of the proceedings.  In most cases investors purchased machines for siting in retail outlets.  A few investors acquired, or were interested in acquiring distribution rights.  The alleged contraventions primarily involved representations made in connection with the sale of fruit juicing machines as to:

   ®arrangements for siting them at existing retail outlets; and

   ®profitability of investment in such machines.

9. Other representations are alleged.  I will mention them when appropriate.  I will deal with the investors in more or less temporal sequence.  Where detailed consideration of documents is necessary, I will include those documents in schedules which, for ease of reference, will be bundled separately from the reasons.  I will generally only include documents which contain relevant representations, focussing on representations made prior to decisions to invest.

   Graeme Raymond Ellis

   Persons Spoken to - Mr Laski, Mr Cameron, Mr Semos, Mr Franzese
   Relevant documents  - See Schedule 1
   Payments Made:

Date	Amount	Reason for Payment
July 1999	$150,000.00	Payment in full for distribution rights in Victoria

1. Mr Ellis first became aware of Michigan in late September 1998 when he saw an advertisement in a Melbourne newspaper for slush machines .  These machines dispense crushed ice drinks.  He met Mr Laski and Mr Cameron at the offices of Michigan in St Kilda.  He was introduced to Mr Semos and eventually became involved in the slush machine business.  In March 1999, at the invitation of Mr Laski, he attended the Sydney Business Expo in order to market these machines.  He noted considerable interest in orange juicing machines which were also being marketed by Michigan.  He heard Mr Peter Semos, Mr Laski and Mr Cameron say to numerous people that Michigan had contracts drawn up for sites at forty-one Franklins Big Fresh Stores and eight Duffy Brothers stores.  He understood that by the end of the Expo, all of these sites had been allocated to investors and secured by deposits.  He spoke to Mr Semos and Mr Laski about the juicing machines, asking whether there were distribution rights available for purchase.  They told him that there were.  On 8 April he received a letter from Michigan in which Mr Laski set out the terms, conditions and price for the distribution rights for Victoria.  Numerous documents were attached.  The letters and attachments are exhibit GRE 13 to Mr Ellis’s affidavit and are included in Schedule 1 to these reasons.  Mr Ellis responded on 15 April 1999, but this letter appears to have related to the slush machines. 

2. Mr Ellis became dissatisfied with the slush machine business.  Mr Laski invited him to a meeting to discuss the problem.  Mr Cameron and Mr Laski suggested that he should swap his interest in the slush machine business for Victorian distribution rights for the orange juicing machines.  Mr Ellis wrote to Mr Laski on 28 June, indicating interest in the general proposal but dissatisfaction with the detail.   On 30 June, Mr Cameron sent him a draft letter for use with prospective investors in the orange juicing machine business.  On 2 July, Mr Franzese sent him a copy of a proposed distribution agreement for Victoria.  On 2 July, Mr Ellis wrote concerning the terms of the agreement.  Much of the negotiation seems to have concerned the status of the arrangements with retailers for the siting of machines.  In particular, in a facsimile dated 5 July 1999 which is exhibit GRE 23 to Mr Ellis’s affidavit, this paragraph appears:

   You have consistently refused to elaborate on what contracts you have in place.  Peter advised me in Sydney and again in Melbourne that Franklins and Coles had been tied up.  Your only statement of substance about the business has been to describe the problems of Franklins.  Hopefully the Franklins’ contracts are still in place.  If they are not, and all the confident stories about “everyone” wanting them proves incorrect, where am I left with 8.2.2 and 8.2.3 (apparently references to the draft contract)?

3. In a letter of 16 July 1999 from Mr Franzese to Mr Ellis, being part of exhibit GRE 27, the following passage appears:

   Michigan will not provide a guarantee or other warranty to any party guaranteeing minimum sales of bottles.  It is at Michigan’s discretion when the guarantee is given.

   In regard to the status of machines sited in the Franklins Big Fresh stores, the internal health department of Franklins have made certain queries regarding compliance of the handling of fruit to Franklins internal policies.  The future status of the Orange Juice machine in Franklins big Fresh is uncertain, until they finalise their handling system.

   Negotiations are continuing with Coles in respect of siting machines.  These negotiations have been commenced in the Brisbane office of Coles.  A trial machine was sited for a short period of time in a Coles Supermarket, Brisbane.  Coles have not made any decisions regarding the siting of orange juice machines in their stores.

   No approach has been made to Safeway/Woolworths. 

4. On 17 July, Mr Ellis wrote to Mr Franzese.  The letter (exhibit GRE 28) primarily concerned slush machines.  He also pointed out that his interest in the orange juicing machines was prompted by his desire to transfer his investment from the slush machine business.  The following paragraphs are relevant:

   However, once again hurdles have arisen.  The costs of paying siting personnel are apparently significant ($300 per site) and I have never, until recently, heard anyone ever say that the machines were anything other than easy to site.  “Franklins are signed up”, “Coles are knocking at our door”.  Yet now it comes to the crunch, it looks like Coles and Franklins are anything but tied up.  I am faced by new sounds from MI such as “the best sites are large Fruit Barns”.  This may be so, but the potential number of sales is significantly lower without the large supermarket chains.
   …

   The receipt of your e-mail confirms my doubts as to the availability of sites and reinforces my resolve to try to water down the opportunity for MI to terminate with 14 days notice and forfeiture of outstanding money’s (Surely one of the huge selling points I had was the availability of large Supermarkets as clients and that therefore it is going to be more difficult to convince sub-distributors!)

5. Notwithstanding his concerns, Mr Ellis indicated that he remained interested in negotiating a swap.  He said at par 60 of his affidavit:

   The process of swapping terms of the new agreement was very difficult.  I was under pressure because they already had my money.  I had several arguments with Mr Laski and then Prospero Franzese rang to say he would take over negotiations.  I had a number of conversations with Franzese. 

6. In par 61 of his affidavit, Mr Ellis set out a conversation with Mr Franzese as follows:

   Mr Franzese: “Rod has said that you are doubting the orange juice machine”. 
   Mr Ellis: “With good reason.” 
   Mr Franzese: “We can work through a deal.” 
   Mr Ellis: “OK, keep going.” 
   Mr Franzese: “Don’t worry, Graeme, I know that they’ve sold 140 machines as a result of the Sydney Expo because I have written the contracts and there are about 110 operating up in Queensland.  Don’t worry, I wouldn’t lie to you.  I was offered a job in Canada but I had to deceive clients so I wouldn’t do it.” 

7. There were other meetings with Mr Franzese.  Mr Ellis said that Mr Franzese had a desk in the Michigan office.  Mr Franzese denied this.  According to Mr Ellis, during one conversation, Mr Franzese said:

   Peter Semos from the Queensland Juice Company is responsible for locating sites.  It is a way of keeping the price down.  Peter Semos is in charge of siting and locating and his brother comes down from Queensland to do siting.  It is $300 to find a site and locate the machine.  A machine is delivered to the site and it is installed.  There is also a 4 hour promotion and the Queensland Juice Company teach staff to use machine.  But siting is the key.

8. On 22 July, Mr Ellis and Michigan agreed to terminate the arrangements concerning the slush machines.  In lieu thereof, Mr Ellis was to have exclusive rights to distribute the orange juicing machines in Victoria.  In his affidavit at par 66 Mr Ellis again refers to representations made by Mr Cameron, Mr Semos and Mr Doherty at the Sydney Expo.  However, having regard to the correspondence discussed above, it is very unlikely that Mr Ellis relied upon such representations, particularly those as to the availability of sites.

   John Edward Carter

   Persons Spoken to - Mr Cameron, Mr Semos
   Relevant documents - See Schedule 2
   Payments Made:

Date	Amount	Reason
26 October 1998	$15,000.00	Deposit and part payment
1 November 1998	$56,940.00	Balance of purchase price

1. In September or October 1998 Mr Carter attended the Franchise Expo at the Convention Centre in Brisbane.  He met Mr Peter Semos and Mr Cameron who were demonstrating orange juicing machines.  Mr Semos said words to the effect that:

   We are offering an investment opportunity where orange juice machines are sited at Franklin’s stores.

2. Mr Carter was attracted by the reference to Franklins whom he considered to be a reputable company and “a big operator”.  He left contact details and later received the documents which are exhibits JEC 1, JEC 2 and JEC 3 to his affidavit.  Copies are contained in Schedule 2 to this judgment.  On or about 26 October 1998, Mr Carter met with Mr Peter Semos and Mr Cameron at an office in Orange Grove Road, Coopers Plains or Salisbury.  Mr Semos said:

   Franklins have given a commitment to take the machines.  The first person who takes up the investment will get the choice of Franklins’ sites.  Franklins do their contractual arrangements in two-year time periods.

3. Mr Carter understood that he was dealing with Michigan.  Nothing was said about Queensland Juice Company.  However the name appears on one of the brochures supplied to him.  Mr Carter was invited to contact several people, including Ian McPherson and Mick Patti, to discuss the machines.  Both gave favourable reports.  Once it was “confirmed” that machines were going into Franklins, Mr Carter was keen to become involved.  The business sounded like a good concept.  Mr Carter had previous experience with Woolworths and was aware of the amount of fruit which was discarded.  He wished to purchase six machines and nominated Franklins, Redbank Plains; Franklins, Sunnybank Hills and Franklins, Beenleigh as locations.  Mr Semos suggested that he should consider Freshy Fruit Mart at Woodridge rather than Franklins, Beenleigh.  He also suggested Coco’s at Annerley and at Sunnybank saying that:

   Some of the independent stores produce better than Franklins.

4. They agreed to site machines at Franklins, Redbank Plains; Franklins, Sunnybank Hills; Coco’s Annerley; Coco’s, Sunnybank and Freshy Fruit Mart, Woodridge. One machine remained un-sited.  Mr Semos and Mr Cameron said that they would find a site.  Mr Semos thought that these sites would perform well.  He had previously sited his own machines at Coco’s.  He said that in sites like Coco’s and Franklins it would be easy to make a couple of hundred dollars a week.  He also said words to the effect:

   You will make somewhere in the vicinity of $300.00 per week for Coco’s and Franklins.

5. Mr Carter agreed to purchase six machines for $11,990 each, a total of $71,940.  He drew $50,000 against an existing loan arrangement with Westpac to pay for the machines.  He paid a deposit of $15,000 on 26 October 1998 and received an invoice which is exhibit JEC 4 to his affidavit.  The invoice is in the name of Michigan Investments.  At some stage prior to his agreeing to purchase the machines, either Mr Semos or Mr Cameron mentioned that Coles Supermarkets were interested in the machines.  On 26 October or shortly thereafter, Mr Cameron said that Mr Carter would have first option on Coles or Woolworths stores if they became available.  There is a handwritten note to this effect on exhibit JEC 4.  Mr Cameron also told him that the contracts with Franklins were for two years and renewable.  There is a handwritten note to that effect upon the exhibit.  Mr Carter does not now recall whether the reference to “renewable” was to renewal at the instance of Franklins or at his instance.  He was expecting a profit of $600 per week from six machines.  Mr Semos and Mr Cameron had suggested a higher figure.

6. On 1 November 1998, the balance of the purchase price was paid.  On or about 14 November, Mr Carter met Mr Semos and Mr Cameron at the Novotel Hotel.  They provided him with further information which he recorded in exhibit JEC 6.  The first five machines were sited quite quickly.  Mr Carter, himself, organised for the sixth machine to go to a Greenbank store.  It was sited on 25 March 1999.  Shortly thereafter, Mr Carter spoke to Mr Tierney at Franklins, Sunnybank Hills.  The latter was quite excited about the machines, saying that he was thinking about building a special display in the refrigeration section.  Mr Carter then discovered that Michigan had already supplied the site with bottles.  He spoke to Mr Cameron who said that Peter Semos would be taking over “the bottles siting”, and that Mr Carter should buy the bottles from Queensland Juice Company.  This was the first time he had heard of that organisation.  Mr Peter Semos and his wife later conducted promotion activities at a number of the stores.  Initially, Mr Carter was earning about $100 per week per operating machine.  Two of the machines were not operating.  He considered that everything was going well. 

1. Things started to go wrong about six months after purchasing the machines.  Oranges became very expensive, Mr Carter found it difficult to contact anybody at Michigan or Queensland Juice Company.  He usually tried to contact Peter Semos.  Mr Carter felt that the stores were not getting behind the orange juicing machines.  They were labour-intensive and there were problems with refrigeration.  On or about 30 May 1999, he received a message from Mr Laski on his answering machine.  Mr Laski asked him to supply details of his machines and how much money he had earned from them because there was some prospect of reimbursement or compensation “as the machines were not working”.  In reply Mr Carter sent a facsimile message dated 30 May 1999, which is exhibit JEC 7 to his affidavit.  He subsequently received a letter from Mr Laski providing an owner’s manual for the juicing machines.  The letter was dated 7 June 1999.  On 26 July 1999, Mr Peter Semos advised him that there would be no more juicing at Franklins sites because they were awaiting a health and safety report.

   Adrian Michael Harman

   Persons spoken to - Mr Cameron, Mr Peter Semos, Mr George Semos
   Relevant documents - See Schedule 3
   Payments Made:

Date	Amount	Reason
13 November 1998	$2,500.00	Deposit and part payment
7 December 1998	$57,000.00	Balance of purchase price

1. In mid-October 1998 Mr Harman and his wife, Pam, attended a Franchising Expo at the Brisbane Exhibition Grounds.  They spoke to Mr Cameron and Mr George Semos concerning orange juicing machines.  Mr Semos explained how the machines worked.  Mr Cameron said:

   The way the business works is that the investor buys the orange juice machines and Queensland Juice Company organises the site.  Queensland Juice Company then trains the staff in the store to operate the machine and does an initial promotion in the store.  The stores buy the oranges and take the proceeds from the juice.  Owners of the machines make their profit from selling the orange juice containers to the stores at $1.50.  The labelled bottles are purchased by investors from Queensland Juice Company at 50 cents per container.  Machine owners enter a contract with the site.  Queensland Juice Company provide maintenance for the machines for twelve months, and after that you can have a maintenance agreement for the machine.

   To date the business has operated by selling the machines directly to small fruit shops.  We now have agreements with large supermarkets, such as Franklins.  We want to have investors buy the machines and  place them in the sites.  These supermarkets are not prepared to make the outlay necessary to purchase the machines themselves.

   Some people keep one machine themselves at a site and use others to supply juice to restaurants.

   There is a machine operating at a site in Clayfield.  It is an older model.  The guy says it is ok.  I believe this new one is better.

   Stores usually throw out the oranges which do not sell.  With the juice machines, these oranges can be used so the stores do not lose money on them.  The fruiterers love the machines because with the number of people that feel the fruit, the oranges are too soft at the end of the day.  Every one wins.  They can use them rather than throw it out.

2. Mr Harman asked for further information, giving his name and address.  On or about 26 October 1998 he received the documents which are exhibit AMH 1 to his affidavit.  Copies are contained in Schedule 3 to the judgment.  On 3 November 1998 he spoke to Mr Cameron by telephone, indicating that he would like more information.  They met in early November at the Novotel Hotel.  Both Mr Cameron and Mr Peter Semos were present.  At some stage Mr Peter Semos said:

   Franklins have agreed to come on board.  In a couple of months we will have Coles as well.  The people who sign up now will be given the first opportunity to purchase further machines for siting at Coles.  There is one person who has already purchased ten machines.

3. Mr Harman asked: 

   Can the stores buy the bottles from elsewhere?

4. Mr Cameron said:

   Franklins will not do that.  They will sign an agreement to say that they will only buy bottles from the investor.  Queensland Juice Company will arrange delivery direct to the site.

5. Mr Semos said:

   There are currently a number of sites available at Franklins stores but they are going fast and there are a number of other interested investors.

6. Mr Harman enquired as to which Franklin sites were available.   Mr Peter Semos said:

   Indooroopilly, Carindale, Brookside, Cannon Hill.  There is also a fruit and vegetable shop at Toowong called Fruity Capers and another one at Indooroopilly called Tropicana.

7. Mr Semos said:

   Fruity Capers is one of the highest volume fruit and vegetable stores in Brisbane.

8. Mr Harman said that he was interested in sites close to where he lived (Toowong) and that he wished to speak to other people who could recommend the business concept and the machine.  He was given names of people in fruit and vegetable shops in Melbourne.  These included John Carter, Robbie Thomas, Ian McPherson and Mick Patti.  Mr Semos also referred Mr Harman to a fruit shop in Clayfield. 

9. Mr Harman asked:

   What is the Michigan Group?  How does the Queensland Juice Company fit in? 

10. Mr Semos said:

    Michigan Group is the marketing company.

11. Mr Harman asked:

    Are you a director of the Michigan Group Peter?

12. It seems that Mr Semos did not reply.  Eventually, Mr Harman indicated that he was interested in all of the identified sites and that he would buy five machines.  He asked Mr Semos for his views concerning the Franklins store at Cannon Hill and Tropicana.  Mr Semos recommended Tropicana.  Funding was then discussed.  Mr Cameron said that a Franklins store at Redbank had only just started and “… did 100 bottles today”.  He also said “That is not unusual and I would expect all Franklins stores have the potential to do that.”

13. Mr Harman asked:

    Why are the figures in the material you sent me a lot lower than what you are saying now?

14. Mr Cameron replied:

    The written profit projections represent the absolute minimum and are based on smaller stores.  The company has to cover themselves because those figures are provided to everyone and some of the sites would be in smaller stores  than the ones you would have.  In Franklins stores you can expect to make well in excess of those figures.

15. Mr Harman then asked to see proposed contracts for the purchase of machines.  He was told that if written contracts were used, solicitors would be involved.  They would want to change things for the sake of changing them.  Mr Harman again said that he wished to make further enquiries.  Mr Cameron said:

    Another investor is interested in the Franklins site at Carindale but I’ll hold it for you.  You will have to get back to us with your decision within a couple of days.

16. Later that day Mr Harman made his own calculations, having decided not to rely on the figures which he had been given at the meeting.  He and his wife decided that they would like to have machines in the Franklins stores at Carindale, Indooroopilly and Brookside.  They also chose the Fruity Capers store, but could not decide between Franklins, Cannon Hill and Tropicana.  They visited Franklins, Cannon Hill.  It seemed to be a smaller store.  Mr Harman contacted a number of the persons nominated by Mr Cameron and Mr Semos.  The information provided was generally favourable.  They then arranged finance through a bank which had been recommended by Mr Semos.  Some time prior to 13 November 1998 Mr and Mrs Harman visited the sites which they had been offered but did not speak to anybody.  On 13 November Mr and Mrs Harman met with Mr Peter Semos and Mr Cameron.  Mr Harman said that he was generally happy with the concept but concerned that he hadn’t spoken to people who had been in the business for any length of time.  Mr Semos said that nobody had been in the business for long.  Mr Harman asked about contracts for siting machines, saying that he would like them signed before he paid.  Mr Semos said that the site contracts would only be signed after the machines had been sited as Queensland Juice Company did not wish to risk losing title.  Mr Harman then said:

    We are prepared to go ahead with the purchase of machines for four sites, Franklins Indooroopilly, Brookside and Carindale, and Fruity Capers at Toowong.  We are undecided for the fifth site between Franklins Cannon Hill and Tropicana Indooroopilly.  What is your opinion?  Which site would you prefer?

17. Mr Semos recommended Tropicana, and Mr Harman said that they would proceed accordingly, buying five machines.  Mr Semos said that he had heard that Mr Harman’s finance had been approved and that the machines were currently in transit.  He expected them in early December.  Mr Cameron said that Mr Harman would have to pay the balance of the purchase price when the machines arrived.  Mr Harman asked that site details be listed on the invoice which was prepared.  Mr Semos asked for a deposit of 10 per cent of the purchase price.  An invoice was issued in the name of Michigan’s Investments Pty Ltd.  The purchase price was said to be $59,950.  Mr Harman offered $2,500 as a deposit.  This was accepted.  The cheque was handed to Mr Semos.

18. On 4 December 1998 Mr Cameron telephoned to advise that the machines had arrived.  He asked that the balance of the purchase price be paid before they were released.  Mr Harman was not happy about that, asking for a copy of the signed contracts with the sites.  Mr Cameron said that Franklins would not sign until the machines were sited and that they would be sited within seven days of payment.  Mr Harman said that the money would be transferred on Monday.  He subsequently spoke to Mr Carter, one of the other investors to whom he had spoken, and to the officer at the bank with whom he had been dealing.  That officer made an enquiry of Mr Peter Semos and advised Mr Harman to proceed.  Mr Harman authorized payment of the balance of $57,000 to Michigan Investments Pty Ltd.  Thereafter he spent much time trying to ascertain when his machines would be installed and why there were delays in effecting such installation.  He was eventually told that the Toowong installation would take place on 14 January and that machines would be installed in the Franklins stores in the following week.  The fifth machine would be installed a week later.

19. On 16 January 1999 Mr Harman went to Fruity Capers at Toowong.  He introduced himself as the owner of the machine which was to be sited there.  He was told that they were going to “give it a try”, but there were presently no ice cabinets available to store the product. They would not be available for at least two weeks.  He was concerned and telephoned Mr Peter Semos, telling him of  his conversation at Fruity Capers.  He asked for information concerning the machines going to Franklins stores.  He was told to ring Mr Greg Tierney at Franklins, which he did.  He introduced himself as the owner of the machines to be installed at Indooroopilly, Brookside and Carindale and was told that machines were not to be installed at those sites as they were not Big Fresh stores.  Mr Harman then telephoned Mr Semos and told him of this conversation, saying that he wished to call off the deal and have his money refunded.  Mr Semos said that he had a written agreement with Franklins which included the relevant stores. 

20. It is clear from the later exhibits to Mr Harman’s affidavit that as early as 25 January 1999 he was communicating with Michigan through his solicitors concerning the installation of machines.  On 11 February, Mr Laski wrote saying:

    Peter Semos has spoken to Franklins this day.  They want the machines - but will wait for the price of oranges to drop until taking delivery.  The reason being, staff need to be trained when the machines are installed. 

21. In the letter he also offered to locate machines at three Coco’s sites; Franklins Big and Fresh (sic), Capalaba; Fresh & Fast, Caloundra Shopping Town and Hyper Fruit Market, Loganholme.  Mr Harman declined the alternative sites.  Correspondence continued.  The solicitors became involved.  On 16 February Mr Harman’s solicitors wrote, purporting to terminate the contract, relying upon Michigan’s inability to site four of the machines.  On 23 February, the solicitors threatened proceedings seeking damages for misleading and deceptive conduct.  On 15 March Mr Laski replied asserting that:

    Franklins were always willing and able to take the machines and site them to their stores.  Due to environmental causes and a shortage in orange supply, Franklins advised that they would be taking the machines once adequate availability of orange was restored.

    Our company offered alternative sites in the meantime and the machines were to go back to Franklins after the price and availability of orange was restored to normal levels.  We offered to pay you initial finance instalments.

22. Clearly, Franklins was not willing to install the machines at sites which had been offered to Mr Harman as they were not Big Fresh stores.  Whatever may have been asserted by Mr Laski, it is quite clear that Mr Harman’s complaints were entirely justified.  In those circumstances it is unlikely that Mr Laski, if he were acting honestly, would, after these events, have placed any reliance in anything that Mr Semos said to him about the siting of machines.  This may not be of much assistance to Mr Harman, but it may be of assistance to some of the other investors who acted on representations made after that time.

    Elisabeth Lasser

    Persons Spoken to - Mr  Semos , Mr Doherty, Mr Semos
    Relevant documents - Nil
    Payments Made:

Date	Amount	Reason
14 November 1998	$4,197.00	Deposit and part payment
20 November 1998	$37,773.00	Balance of purchase price

1. In late 1997, Ms Lasser and her partner, Mr Coad, were looking for a business which they could operate in addition to their existing business in which they provided computer training.  They considered various alternatives and in about September 1998, saw an advertisement in a newspaper for a business called “Top Brew”.  They telephoned the specified telephone number and spoke to Mr Doherty.  He told them that the business involved the purchase of commercial coffee machines for placement in locations such as offices and car sales yard waiting rooms.  Mr Doherty later introduced them to Mr Peter Semos as the director of Top Brew.  At some stage Ms Lasser said that she was interested in a business that would not take up a lot of time.  Mr Doherty said that he was the sales representative for Michigan Group Pty Ltd for the sale of territories.  He said that the Top Brew business was run by Michigan and that principals of the company were Rod Laski and Charles Cameron.  They were very wealthy.  Mr Doherty gave them certain information and a booklet.  

2. In early October Mr Doherty telephoned Ms Lasser and said that he was concerned that Mr Laski, Mr Cameron and Michigan might not be reputable.  He said that he did not wish to continue any further negotiations with Ms Lasser as he had no intention of dealing with Michigan.  He subsequently telephoned to say that he was now in partnership with Peter Semos, selling coffee machines.  They had formed a separate company.  Ms Lasser could deal with them and not with Michigan.  She subsequently advised Mr Doherty that she did not intend to proceed with the Top Brew business.

3. In the same month, Mr Doherty telephoned, proposing a business opportunity which involved the purchase of commercial orange juicing machines.  They were said to be available through Queensland Juice Company, a company owned by Peter Semos and not connected with Michigan.  Towards the end of October, Ms Lasser and Mr Coad met with Mr Peter Semos at the Franklins store at Sunnybank Plaza.  Mr Doherty was also present.  The purpose of the meeting was to inspect a machine.  The meeting lasted between 30 and 45 minutes.  They were told that juicing had occurred earlier in the day.  The Franklins’ staff recognised Mr Semos.  They subsequently had coffee.  Peter Semos said:

   Once the machines are installed you purchase plastic two litre bottles which are labelled accordingly.  You deliver the bottles to the shop and then invoice the shop.  There is a minimum purchase of five hundred bottles per order.  You should make $500 or more per week in profit from each machine, guaranteed.  If any site does not perform, we will resite the machine for you at no charge, but I assure you that you will make $500 profit minimum each week on each machine.  These are targets reached by other operators and are very realistic.  We have some people in Melbourne who have invested with us and they are doing more than 500 bottles per week.  We are just starting off in Queensland but Clayfield Markets have a machine and it is turning over a minimum of 500 bottles per week.

4. There was general discussion concerning sites, including Franklins, Brookside; Franklins, Morayfield; Franklins, Nerang; Franklins, Cannon Hill; Franklins, Sunnybank Plaza; Aspley Pick ’n Pay; Farmer Joe’s at Kedron, and Coco’s fruit shops.  Ms Lasser said that she wanted two Franklins stores and was told that they were available.  She said that she would like Morayfield.  Mr Semos said that it would do more than 500 bottles per week.  Ms Lasser said that she was also interested in Pick ’n Pay at Aspley.  Mr Semos said that it was already under contract.  At some stage, he had told her that the Clayfield Market site had been successful.  She thought that Farmer Joe’s would be as successful as that outlet. This was based upon her knowledge of the site.  She said that she would take the Farmer Joe’s site.  Mr Semos said that it was also taken.  Subsequently, Mr Doherty invited her to look at Franklins, Cannon Hill.  She did so on Saturday, 14 November 1998.  She did not like it and decided to go ahead with Franklins, Morayfield; Franklins, Brookside and the Aspley Pick ’n Pay store.  This is somewhat curious as she had been told that the last-mentioned outlet was not available.  She paid Mr Semos a cheque for $4,197 by way of deposit and received a receipt on Queensland Juice Company letterhead.  Mr Semos said:

   If the sites do not work then we will resite the machines.  Don’t worry.  It will be resited within seven days.

5. This appears to relate to what is called a “special condition” on the invoice which provides:  

   Out-clause, seven day notice on siting agreement for Franklins and Pick ’N Pay.  If so machine will be resited at no charge. 

6. This was written in at the request of Mr Jack Coad.  At a later stage it was agreed that Ms Lasser could exchange her Pick ’n Pay site for the Farmer Joe’s site which had become available.  Again, this is curious as the Pick ’n Pay site had initially been one of her choices ahead of Farmer Joe’s.  It is likely that this aspect of Ms Lasser’s evidence is unreliable.  On 20 November 1998 Ms Lasser, Mr Coad and Mr Peter Semos met.  Ms Lasser said that her machines were to be sited at Franklins Big Fresh, Morayfield; Franklins Fresh, Brookside and Farmer Joe’s Country Market in Kedron.  Mr Semos said that the machines would be sited at Farmer Joe’s and Franklins, Morayfield five days after payment of the balance of the purchase price.  As Franklins Fresh, Brookside was being renovated, installation would be in the second week in December.  Ms Lasser gave Mr Semos a cheque for the balance of the purchase price.  He then said:

   Your machines will be sited within 5 days of clearing the cheque.  The machines come up from Melbourne.  That is why it takes 5 days.

7. In November Ms Lasser discovered that no machine had been installed at Farmer Joe’s and subsequently telephoned Mr Semos.  He said that there was a delay in printing labels and that they would be ready before Christmas.  At some stage Ms Lasser was told that a machine was to be installed on 25 November at Franklins Big Fresh, Morayfield.  She visited the site with Mr George Semos and his wife in order to conduct a promotion.  Mr Semos introduced her to the acting Produce Manager, Michael Raffout, indicating that Franklins would be buying bottles from Ms Lasser.  Mr Raffout appeared surprised and said that he had thought that he was dealing with Queensland Juice Company.  He then said that Franklins Big Fresh required a number of tests including health and safety checks, and that the machines could not be operated on that day.  Ms Lasser was surprised by this statement as she had understood from Mr Peter Semos that the machines had already been tested.  Mr George Semos said that Franklins merely wanted to do their own checks.  On 3 December Ms Lasser participated in a promotion at the store.  On 4 December, she noted that Franklins, Morayfield had run out of juicing oranges.  A further promotion was held on 17 December.

1. Mr Doherty also represented that:

   The “A” sites easily achieve $750 per week per machine in sales turnover.

   This was both a representation as to existing facts and as to future matters. The evidence from investors makes it highly unlikely that it was true as to existing facts. There is no evidence of any reasonable grounds for it as it related to future matters. I infer that it constituted a breach by both Michigan and Queensland Juice Company of the provisions of s 52. I am also willing to infer that Mr Semos was knowingly concerned in Queensland Juice Company’s contravention.

2. On 31 March 1999 Mr Doherty told Mr Dewan that sites at Franklins Big Fresh stores at Marrickville and Burwood and Duffy Brothers stores at Hurstville, Burwood and Chatswood were available, as were Fruit World and Joe’s Fruit Market. This amounted to a representation that these sites were currently available and that it would be possible for Mr Dewan to have his machines sited there. These were future matters. There is no evidence of any reasonable grounds for such representations. I am satisfied that this conduct constituted a contravention of s 52 by Michigan.

   Mr Kumar

3. Mr Kumar also received the Expo brochure. For the reasons given in connection with Mr Dewan’s transaction, I consider that the inclusion of the alliance assertion in the brochure and its distribution constituted a contravention of s 52 by Michigan, in which contravention Mr Laski was knowingly concerned.

4. Mr Semos and Mr Doherty spoke to Mr Kumar in Mr Dewan’s presence.  Mr Dewan’s account differs in some respects from Mr Kumar’s.  However I am satisfied that each was truthful.  It is not surprising that they should express their recollections in different ways and, to some extent, recall different aspects of what was said.

5. Mr Doherty’s evidence was generally supportive of Mr Kumar, save in one respect.  He denied having told Mr Kumar that any site would average 400 bottles per week.  He said that he had been told not to offer such undertakings.  He agreed, however, that he had offered Michigan’s guarantee of 200 bottles per week.  I am inclined to accept Mr Doherty as generally honest.  However Mr Kumar’s assertion was that Mr Peter Semos and Mr Doherty had told him that he could expect to sell an average of 400 bottles per week.  It is likely that Mr Semos made such a statement.  Mr Doherty may not have dissented from it.  I saw no reason to doubt Mr Kumar’s evidence.  I accept his evidence as to the representations made prior to his decision to invest.

6. Mr Semos represented that the deal with Franklins was “expanding into New South Wales”. He also said that it was restricted to Big Fresh stores. This was both a representation as to existing facts, and a representation as to future matters. It seems to have been untrue as a statement of existing facts. There is no evidence of any reasonable grounds for such a representation as to future matters. It was therefore a contravention of s 52 by both Michigan and Queensland Juice Company. I am satisfied that Mr Semos was knowingly concerned in the breach by Queensland Juice Company.

7. On 3 April, Mr Doherty told Mr Kumar that available “A” sites included Tuggerah, Gosford, Bankstown, Campbelltown and a large fruit barn on the Hume Highway. These statements were representations as to future matters, namely the availability of sites for the future installation of machines. I am satisfied that there were no reasonable grounds for this representation and that it constituted a contravention of s 52 by Michigan.

   Mr Egan

8. On 26 March 1999, at the Darling Harbour Expo, Mr Egan received the exhibitors’ brochure to which I have referred. It is exhibit BME 1 to his affidavit. For reasons which I have given in connection with Mr Dewan and Mr Kumar’s cases, this constituted a contravention by Michigan of s 52 of the Act, in which contravention Mr Laski was knowingly concerned. Mr Egan also received a circular (see exhibit BME 2) which had the representation as to alliances with major supermarket chains. This was in two forms. The first was:

   The alliance we have formed with some of the major supermarket chains in Australia to procure sites that will have a high turnover of freshly squeezed orange juice ensures a constant supply of new sites.

9. The second was:

   Sites such as Franklins Big Fresh and other major retailers have contracted with us to place the machines in all their stores and those sites are now available on first in best dressed basis.

10. As I have previously observed, such statements were representations both as to existing facts and as to future matters. There was no “alliance” other than that with Franklins, and it did not relate to New South Wales. The representation as to existing facts was therefore untrue. To the extent that the representation related to future matters, there were no reasonable grounds for it. In those circumstances these statements were contraventions of s 52 by Michigan. I am willing to infer that Mr Laski was knowingly concerned in such contraventions.

11. Similar representations were contained in another Michigan document dated 26-28 March 1999 which is also part of exhibit BME 2. This constituted a further contravention of s 52 by Michigan. There was some suggestion that one or other of the relevant documents had been produced without Mr Laski’s authority. However the documents were produced for the Sydney Expo, and Mr Laski was in attendance. Given his own evidence as to the extent to which he sought to control Mr Cameron’s activities, I think it most unlikely that any document could have been distributed at the show without his knowledge. Mr Doherty said that he and Mr Laski took the disputed document to the Expo. This supports my conclusion that Mr Laski was knowingly concerned in the contravention.

12. All oral representations made prior to the investment were allegedly made by Mr Cameron, Mr Peter Semos or Mr Doherty.  I accept Mr Doherty’s denial that he claimed to own machines himself.  I otherwise accept Mr Egan’s evidence as to the representations made prior to his decision to invest. 

13. Mr Doherty represented to Mr Egan on 26 March 1999 that:

    We have a number of stores lined up in which to locate the machines.  We have arrangements with major supermarket chains and fruit and vegetable shops, for example, Franklins Big Fresh and Duffy Brothers fruit and vegetable chains.  There are also other sites which we call A1 sites which turn over more than $100,000 per week per site in fruit sales.

    This is the launch of the new machines in New South Wales.  We have arranged to put the machines into these sites straight away and the sooner you get in the better sites you are going to get.

14. These statements contained representations as to present facts and also as to future matters. To the extent that they related to present facts, they were misleading in that there was no arrangement for permanent siting of machines at any sites other than Franklins. By 26 March, even that arrangement must have been in doubt. As to the representations concerning future matters, the evidence discloses no reasonable grounds for such representations. I am satisfied that this conduct constituted a contravention of s 52 by Michigan.

15. At some time between 8 and 13 April, Mr Cameron, in Mr Doherty’s presence, represented that Franklins Big Fresh stores at Nowra, Penrith and Gosford, Duffy Brothers stores across Sydney and other major fruit stores were sites “… on which we are seeking to have machines installed.  We want to allocate the sites as soon as possible.” This statement constituted a representation that machines would, in the future, be sited at those stores. The evidence discloses no reasonable grounds for such a representation. It therefore constituted a contravention of s 52 by Michigan.

16. In early May Mr Doherty offered to install Mr Egan’s machines at Franklins Big Fresh, Nowra; Banana Joe’s in Marrickville; Marrickville Fruit and Miles Fresh in Rockdale. A machine was installed at only one of these venues, Miles Fresh in Rockdale. Machines were installed at other venues. It seems clear that there was no reasonable basis for representing to Mr Egan that his machines could be sited at Franklins Big Fresh, Nowra; Banana Joe’s, Marrickville or Marrickville Fruit. Mr Doherty’s representation constituted a contravention by Michigan of s 52 of the Act.

    Mr Kwon

17. I am unable to draw any conclusion as to the identity of the third person at the Michigan stand at Darling Harbour in March 1999, but I accept Mr Kwon’s evidence as to the representations made to him by Mr Laski and Mr Cameron, and later by Mr Cameron.  In March, Mr Laski and Mr Cameron told Mr Kwon:

    We already have an agreement with Franklins to put the machines in their Fresh and Big Fresh stores, but they are not going to put them in the No Frills stores.

18. This representation was made at Darling Harbour and would have been understood to relate to Franklins stores in New South Wales. To the extent that the representation conveyed the assertion that there was an agreement to install machines in Franklins stores other than those in Queensland, it was incorrect. I am satisfied that by this time, Mr Laski was aware of the problems with siting in Franklins stores in Queensland. To the extent that it was a representation that machines would be sited in Franklins stores, it was without any reasonable grounds. The statement constituted a contravention of s 52 by Michigan. Mr Laski was knowingly concerned in the contravention.

19. Mr Laski and Mr Cameron also represented that:

    The machines are very popular in Queensland.  They are already being used in Brisbane and all the investors are very happy.  They are a very good investment and very profitable.  They are making $1,000 per month.  The machines cost $15,750 each.  You should recover your investment in one and a half years.

20. The representation that machines were making $1,000 per month is a representation of an existing fact. There was no factual basis for it. The evidence of the investors suggests that it is most unlikely to have been true. I am satisfied that it was misleading and that it constituted a contravention by Michigan of s 52 of the Act. I am satisfied that by this stage Mr Laski was aware of the difficulties involved in siting machines and in their operation as a result of the cost of oranges. I therefore conclude that he was knowingly concerned in this contravention. The statement that Mr Kwon “should recover your investment in one and half years” was a representation as to a future matter. There were no reasonable grounds for it. It constituted a contravention by Michigan of s 52. I am satisfied that Mr Laski was knowingly concerned in it.

21. After these representations were made, Mr Kwon agreed to buy two machines. He then changed his mind. Mr Cameron represented that one machine was already on its way to a site. Mr Semos represented, in Mr Cameron’s presence, that one machine was already on its way to Franklins, Chatswood. There was no Franklins store at Chatswood at that time. It follows that no machine could have been on the way to such a store. There was also no prospect of its being installed there at any time in the future. Those statements constituted both misrepresentations as to actual facts and as to future matters. They constituted contraventions of s 52, both by Michigan and by Queensland Juice Company. I am satisfied that Mr Semos was knowingly concerned in the breach by Queensland Juice Company.

    Mr Poole

22. Mr Poole dealt with Ms Moretto.  In a letter dated 11 June 1999 she made the following representations on Michigan letterhead:

    Our company has entered into agreements with National Supermarket Chains to provide these machines throughout Australia. 

    The business opportunity provides for the purchase of a machine at a price of $25,000 ($10,000 Trade) each F.O.B. Melbourne which will be sited in a major supermarket.  The price includes siting in a prime area, delivery and installation on site, training of staff in the use and maintenance of the machine, storage and preparation of the orange juice, a 3 month on-site labour and parts warranty and a 12 months parts warranty.

23. Although this representation was on Michigan letterhead, it was made on behalf of Yeppoon. Neither Michigan nor Yeppoon had agreements with national supermarket chains, although Michigan may have had an arrangement with one such chain (Franklins) and a temporary arrangement with Coco’s. By June 1999, there was considerable doubt as to the Franklins arrangement. As a representation of fact the statement was misleading and deceptive. The statement also impliedly represented the availability of sites for the future. The evidence demonstrates no reasonable ground for such representation. The statement constituted a contravention of s 52 by Yeppoon. I am, however, not satisfied that Ms Moretto was aware of the falsity of the factual representation, or of the absence of any reasonable basis for the representation as to future matters. It is possible that she understood Michigan to have entered into appropriate arrangements. There is simply no evidence as to Ms Moretto’s state of mind concerning these matters. ACCC has failed to establish that she was knowingly concerned in any contravention.

24. Elsewhere in the letter, the following passage appears:

    There is no time commitment with this business other than invoicing the site.

25. A little later it is asserted that:

    Few business offer a high return with no time commitment such as this.

26. The representation that the only time commitment was in invoicing the sites was misleading. At the very least, investors would have to canvass for orders. This, however, appears to be of minor significance. Mr Poole also received a “Your Profit Potential” document. It contained the usual worked examples and a disclaimer, together with a written guarantee of 300 bottles per week per site. For reasons previously given, I do not consider this document to have been a contravention of the Act.

27. In June 1999 Ms Moretto represented to Mr Poole that all five machines would go into Franklins sites in Brisbane and/or the Gold Coast. This was a representation as to future matters. There is no evidence of any reasonable grounds for such representation. In those circumstances Yeppoon contravened s 52 of the Act. I am unable to conclude that Ms Moretto was knowingly concerned in the contravention.

    Mr Rotheram

28. Apart from the documents allegedly received from Michigan by Mr Vasey and passed to Mr Rotheram, with which I will deal at a later stage, the primary documentary representation was contained in a letter from Yeppoon dated 1 November 1999, signed by Ms Moretto.  It is exhibit KR 3 to Mr Rotheram’s affidavit.  It stated, in part, as follows:

    The following Projections are based on machines that are currently in the marketplace.  A poor to average store would be one selling 350 - 400 bottles per week whereas a good to excellent store can achieve 800 - 1,000 bottles per week.

    Most investors purchase machines in lots of five, therefore he/she may have one or two poor stores, ie 350 - 400 bottles per week and two or three good stores achieving the 800 - 1,000 bottles per week.  Therefore the figures below are based on a variation of volumes. 

    Calculations followed.

29. These representations related to both existing facts and future matters. The projected sales figures appear to be quite inconsistent with the experience of the various investors who gave evidence. I am satisfied that to the extent that the representations related to existing facts, they were untrue and that to the extent that they related to future matters, they were made without reasonable grounds. They therefore constituted contraventions by Yeppoon of s 52. I draw no inference as to Ms Moretto’s involvement in the contraventions.

30. In the same letter, under the heading “Sites”, the following passage appeared:

    All Franklins Big Fresh in Australia currently have machines as well as their associated supermarkets in Asia.  The Coco’s chain of fruit and vegetable marts as well as many very high volume independent stores are housing our machines.  The Spar Supermarket chain will commence receiving the machines within three weeks and Bi-Lo Mega Fresh towards the end of the month.  The New Year will see our machines sited in Woolworths and Coles.  The investor is welcome to seek out sites and, if required, we will endeavour to negotiate securing those sites.

31. The representation that there were machines in all Franklins Big Fresh stores in Australia was incorrect. The representation that machines were “housed” at Coco’s stores was also incorrect unless “housed” meant “stored”. The arrangement with Coco’s was for little more than a trial. Mr McPhee said that it was clear within a few months of installation (in June 1999) that the trial had been unsuccessful. He had the machines removed from all but two stores. The representation as to the SPAR stores may have been correct. There was no justification for the representation concerning BI-LO, Woolworths and Coles. With the exception of the representation as to SPAR stores, the representations as to future matters were without reasonable grounds. They therefore constituted contraventions of s 52 by Yeppoon. Again I am unable to make any findings as to Ms Moretto’s involvement.

32. Exhibit KR 6 to Mr Rotheram’s affidavit included a letter dated 10 November on Michigan letterhead with an accompanying “Your Profit Potential” document. Mr Laski denied authorizing transmission of either document. Mr Rotheram said that he had received these documents from Mr Laski, but he then said that Mr Laski had sent them to Mr Vasey who was Mr Rotheram’s finance broker. Mr Vasey had forwarded them to him. Obviously, there is a degree of hearsay in this evidence. I am not prepared to act upon it in the face of Mr Laski’s express denial that he sent the documents. In any event their significance is limited.

33. In late October 1999 Mr Rotheram met with Ms Moretto, Mr Cameron and Mr Semos.  Mr Semos said

    The machines are sold in lots of five. 350 to 400 bottles per site per week.  Some sites up to 800 - 1,000 each week.  The minimum a bad site would do is 350 bottles per week.  The statistics down south back that up.  The machines are new in Queensland and Brisbane.  The cash flow is very good.  We can support the interest payment on the loan until the site gets up to 350 bottles.

34. The representations as to bottle sales were as to existing facts and as to future matters. To the extent that they related to existing facts they were unlikely to be true, having regard to the experience of other investors. No justification was offered for them in evidence. To the extent that they related to future matters, they were without reasonable grounds. This conduct constituted a contravention of s 52 of the Act by Yeppoon, Michigan and Queensland Juice Company. I am satisfied that Mr Semos was knowingly concerned in Queensland Juice Company’s contravention. I am not satisfied that either of the other persons was knowingly concerned in any contravention.

35. In the end Mr Rotheram did not buy machines from Yeppoon or from Michigan. He entered into a separate deal with Mr Semos who told him not to inform Michigan of it. Any loss suffered by Mr Rotheram was attributable to his decision to purchase machines from Mr Semos. It is unlikely that in so doing, he acted upon representation made as to Michigan’s arrangements with retail outlets. Although Ms Moretto’s conduct on behalf of Yeppoon and Mr Cameron’s on behalf of Michigan may have contravened the Act, there is little point in spending substantial amounts of time in considering it further, having regard to the relief presently sought.

    ORDERS

36. In view of the considerable difficulties to which I have referred I have thought it appropriate to publish my findings of fact in this case without formulating any orders.  I will hear the parties as to forms of orders after they have had an opportunity to consider these findings.  I will hear also hear submissions as to costs at that time.

I certify that the preceding four hundred and twenty-nine (429) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate:

Dated:            26 November 2002

Counsel for the Applicant:	Mr D J S Jackson QC Mr A Duffy
Solicitor for the Applicant:	Corrs Chambers Westgarth
The First Respondent did not appear.
The Second Respondent appeared in person.
The Third Respondent did not appear.
The Fifth Respondent appeared on behalf of the Fourth Respondent.
The Fifth Respondent appeared in person.
The Sixth Respondent appeared in person.
The Seventh Respondent appeared in person.
The Eighth Respondent did not appear.
The Ninth Respondent did not appear.
Dates of Hearing:	3, 4,10, 11, 12, 13 & 14 December 2001 18 February 2002 15, 16, 17, 18 and 19 April 2002
Date of Judgment:	26 November 2002

Schedules of Documents Referred to in the Reasons for Judgment in
Australian Competition & Consumer Commission  v Michigan Group Pty Ltd (ACN 065 378 029) [2002] FCA 1439

Page Number

Schedule 1
Graeme Raymond Ellis

GRE 13

Letter dated 8 April 1999
Sample Letter dated 30 March 1999
Sample Your Profit Potential Page

2-3
4-5
6

Schedule 2
John Edward Carter

JEC 1
Promotional Flyer dated October 1998

JEC 2
Michigan Group Brochure relating to the Boom Boom Machine

JEC 3
QJC Brochure relating to the Orange Juice Machine, Pineapple Peeler and Boom Boom Machine

2-3

4-7

7-10

Schedule 3
Adrian Michael Harman

AMH 1 (Partial)
Letter dated 25 October 1998
Your Profit Potential Page
TJM Brochure under Michigan Group Cover Sheet

 2-3
4
5-6

Schedule 4
Adrian Dominik Scipione

ADS 1 (Partial)
Letter dated 9 November 1998 under Michigan Cover Sheet
Your Profit Potential Page
QJC and TJM Brochures
Application for further information

2-4
5
6-9
10

Schedule 5
Ray Turton

RT 1
QJC Brochure relating to the Orange Juice Machine, Pineapple Peeler and Boom Boom Machine under Michigan Cover Sheet

RT 2
Letter dated 25 October 1998
Your Profit Potential Page

RT 3
Letter dated 21 November 1998
Your Profit Potential Page

2-5

6-7
8

9-10
11

Schedule 6
Leon and Dianne Kirkwood

LWK 1
Letter dated 8 February 1999
TJM Brochure

2-3
4-5

Schedule 7
Tom Nemes

TN 1
Letter dated 16 March 1999
TJM Brochure
Your Profit Potential Page

TN 3
Letter dated 9 April 1999

2-3
4-5
6

7-12

Schedule 8
Arjan Dewan

AD 1
Extract from Franchising Business Expo Booklet

2

Schedule 9
Siva Ratnasabapathy Kumar

SRK 1
Extract from Franchising Business Expo Booklet

2

Schedule 10
Bryan Martin Egan

BME 1
Franchising Business Expo Booklet
Promotional Flyer entitled “Sydney Franchising and Small Business Show”
TJM Brochure

BME 2
Letter dated 26-28 March 1999
Your Profit Potential Page

2-3
4

5-6

7-8
9

Schedule 11
Gordon John Poole

GJP 1
Letter dated 11 June 1999
Your Profit Potential Page
TJM Brochure

2-3
4
5

Schedule 12
Keith Rotheram

KR 3
Letter dated 1 November 1999

KR 6
Orange Juice Dispensing Machine Cash Flow Forecast
Your Profit Potential Page

2-3

4-5
6

Schedule 1

Documents Referred to in Relation to the Evidence of Graeme Raymond Ellis

GRE 13

Letter dated 8 April 1999
Sample Letter dated 30 March 1999
Sample Your Profit Potential Page

2-3
4-5
6

Schedule 2

Documents Referred to in Relation to the Evidence of John Edward Carter

JEC 1
Promotional Flyer dated October 1998

JEC 2
Michigan Group Brochure relating to the Boom Boom Machine

JEC 3
QJC Brochure relating to the Orange Juice Machine, Pineapple Peeler and Boom Boom Machine

2-3

4-7

7-10

Schedule 3

Documents Referred to in Relation to the Evidence of Adrian Michael Harman

AMH 1 (Partial)
Letter dated 25 October 1998
Your Profit Potential Page
TJM Brochure under Michigan Group Cover Sheet 2-3
4
5-6

Schedule 4

Documents Referred to in Relation to the Evidence of Adrian Dominik Scipione

ADS 1 (Partial)
Letter dated 9 November 1998 under Michigan Cover Sheet
Your Profit Potential Page
QJC and TJM Brochures
Application for further information 2-4
5
6-9
10

Schedule 5

Documents Referred to in Relation to the Evidence of Ray Turton

RT 1
QJC Brochure relating to the Orange Juice Machine, Pineapple Peeler and Boom Boom Machine under Michigan Cover Sheet

RT 2
Letter dated 25 October 1998
Your Profit Potential Page

RT 3
Letter dated 21 November 1998
Your Profit Potential Page

2-5

6-7
8

9-10
11

Schedule 6

Documents Referred to in Relation to the Evidence of Leon and Dianne Kirkwood

LWK 1
Letter dated 8 February 1999
TJM Brochure 2-3
4-5

Schedule 7

Documents Referred to in Relation to the Evidence of Tom Nemes

TN 1
Letter dated 16 March 1999
TJM Brochure
Your Profit Potential Page

TN 3
Letter dated 9 April 1999

2-3
4-5
6

7-12

Schedule 8

Documents Referred to in Relation to the Evidence of Arjan Dewan

AD 1
Extract from Franchising Business Expo Booklet 2

Schedule 9

Documents Referred to in Relation to the Evidence of Siva Ratnasbapathy Kumar

SRK 1
Extract from Franchising Business Expo Booklet 2

Schedule 10

Documents Referred to in Relation to the Evidence of Bryan Martin Egan

BME 1
Franchising Business Expo Booklet
Promotional Flyer entitled “Sydney Franchising and Small Business Show”
TJM Brochure

BME 2
Letter dated 26-28 March 1999
Your Profit Potential Page

2-3
4

5-6

7-8
9

Schedule 11

Documents Referred to in Relation to the Evidence of Gordon John Poole

GJP 1
Letter dated 11 June 1999
Your Profit Potential Page
TJM Brochure 2-3
4
5

Schedule 12

Documents Referred to in Relation to the Evidence of Keith Rotheram

KR 3
Letter dated 1 November 1999

KR 6
Orange Juice Dispensing Machine Cash Flow Forecast
Your Profit Potential Page

2-3

4-5
6