Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5)

[2014] FCA 340

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340

Citation:

Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340

Parties:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133, PETER CLARENCE FOSTER, PETER LESLIE O'BRIEN, ADAM TROY ADAMS and MICHAEL ANTHONY BOYLE

File number:

NSD 1163 of 2011

Judge:

YATES J

Date of judgment:

8 April 2014

Catchwords:

CONSUMER LAW – franchising – appointment of Area Managers in relation to supply of claimed weight loss product – whether misleading or deceptive conduct – whether representations made that are false or that are false or misleading in a material particular – whether invitations made to engage in a business activity requiring the performance of work and/or the investment of moneys – whether personal respondents liable as principals or accessories – whether any relevant obligation of disclosure arises independently of the requirements of the Franchising Code.   

Legislation:

Companies Act 1962 (SA) s 124
Competition and Consumer Act 2010 (Cth) ss 6, 51AE, 51ACA
Competition and Consumer Act 2010 (Cth) Sch 2 ss 18, 29
Corporations Act 2001 (Cth) s 9
Crimes Act 1914 (Cth) s 5
Evidence Act 1995 (Cth) ss 57, 135
Franchising Code cl 3, 4, 5, 6, 6A, 10
Trade Practices Act 1974 (Cth) ss 52, 53, 59, 75B, 232
Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) reg 3

Cases cited:

Ashbury v Reid [1961] WAR 49
Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3) [2013] FCA 984
Australian Competition and Consumer Commission v Chaste CorporationPty Ltd (in liquidation) [2005] FCA 1212
Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (In Liquidation) (No 3) [2012] FCA 939
Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (In Liquidation) (No 4) [2012] FCA 1171
Bluecorp Pty Ltd (in liq) v ANZ Executors & Trustee Co Ltd (1994) 13 ACSR 386
Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 16 FCR 562
Foster v Australian Competition and Consumer Commission [2012] FCA 953
Fraser v NRMA Holdings Limited (1995) 55 FCR 452
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296
Hamilton v Whitehead (1988)  166 CLR 121
Harris v S (1976) 2 ACLR 51
Kennedy v Sykes (1992) 24 ATR 546
Mallan v Lee (1949) 80 CLR 198
Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1
Rafferty v Madgwicks (2012) 203 FCR 1
R v Goldie; Ex parte Picklum (1937) 59 CLR 254
Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180
R v Tannous (1987) 10 NSWLR 303
The Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124

Austin RP, Ford HAJ, Ramsay IM, Company Directors Principles of Law and Corporate Governance (Lexis Nexis Butterworths, 2005)

Date of hearing:

3, 4, 5, 6, 7, 12, 13 September and 24 October, 2012

Date of last submissions:

21 December 2012

Place:

Sydney

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

831

Counsel for the Applicant:

Mr ST White SC, Mr D Kent QC, Ms KC Morgan

Solicitor for the Applicant:

Corrs Chambers Westgarth

Solicitor for the First Respondent:

Mr Thomas Russell, ERA Legal

Second Respondent:

Did not appear at the hearing

Third Respondent:

Did not appear at the hearing

Solicitor for the Fourth Respondent:

Mr Mathew Gibson, Mathew Gibson Legal Pty Ltd

Counsel for the Fifth Respondent:

Mr Levente A Jurth with Mr Michael D Alexander

Solicitor for the Fifth Respondent:

Londy Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1163 of 2011

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133
First Respondent

PETER CLARENCE FOSTER
Second Respondent

PETER LESLIE O'BRIEN
Third Respondent

ADAM TROY ADAMS
Fourth Respondent

MICHAEL ANTHONY BOYLE
Fifth Respondent

JUDGE:	YATES J
DATE OF ORDER:	8 APRIL 2014
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.On or before 29 April 2014, the applicant serve on all respondents a draft of the orders and directions it proposes at the present time.

2.On or before 13 May 2014, each respondent notify the applicant in writing as to whether or not he or it opposes the making of the draft orders and directions.

3.If any respondent opposes the making of the draft orders and directions, that respondent serve on the applicant, on or before 13 May 2014, a draft of the orders and directions that that respondent proposes.

4.Copies of all documents served in accordance with these orders be provided to the Associate to Yates J by the party serving the document at the time of service.

5.If the applicant is of the view that it has pleaded a cause of action that has not been addressed and determined in the reasons for judgment published today, written notice of that fact be given to the Associate to Yates J and to each respondent at the time the applicant serves its draft proposed orders and directions.

6.The proceeding be listed at 9.30 am on 21 May 2014 for directions only.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1163 of 2011

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133
First Respondent

PETER CLARENCE FOSTER
Second Respondent

PETER LESLIE O'BRIEN
Third Respondent

ADAM TROY ADAMS
Fourth Respondent

MICHAEL ANTHONY BOYLE
Fifth Respondent

JUDGE:	YATES J
DATE:	8 APRIL 2014
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[1]
Overview........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[2]
The Franchising Code of Conduct........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[11]
The SensaSlim DVD........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[20]
Description of the documents........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[63]
The Area Manager Proposal........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[64]
The KMB letter........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[86]
The Robinson Legal letter........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[88]
The Frequently Asked Questions document........ ........ ........ ........ ........ ........ ........ ...	[91]
The Disclosure Document........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[92]
The Retail Business Opportunities document........ ........ ........ ........ ........ ........ ........	[95]
The Price and Potency Advantages document........ ........ ........ ........ ........ ........ ........	[96]
THE CONDUCT OF THE PROCEEDING........ ........ ........ ........ ........ ........ ........ ........ ....	[97]
THE EVIDENCE OF VARIOUS WITNESSES........ ........ ........ ........ ........ ........ ........ .....	[125]
Evidence concerning the establishment and conduct of the SensaSlim business......	[126]
Christopher Waters........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[126]
David Scott Emerton........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[170]
Vikki Dallas Emerton........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[246]
Evidence concerning the making of the SensaSlim DVD........ ........ ........ ........ ........ ...	[256]
Peter Anthony Frare........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[256]
Richard Woolley........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[277]
The evidence of Sales Managers and Area Managers........ ........ ........ ........ ........ ......	[290]
Linda-Jane Diana Stanistreet........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[290]
James Walter Evans........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[320]
Darren Rex Bubb........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[350]
Michael Shaun Driscoll........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[369]
Andrew Robert James........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[389]
Christopher Charles Coffey........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[416]
Marni Rose Coffey........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[438]
Jeremy Rohan Dharmaratne........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[445]
Stephen John Cook........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[463]
Expert evidence........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[484]
Catriona Jean Storey-Whyte........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[484]
Zoran Iliev........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[493]
The Institut de Recherche Intercontinental and the Strebel report........ ........ ........ ...	[496]
Other affidavits........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[516]
THE ALLEGATIONS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[518]
THE CASE AGAINST SENSASLIM........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[546]
Mr Foster’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[546]
Mr O’Brien’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[580]
The worldwide trial of the SensaSlim product........ ........ ........ ........ ........ ........ ........ .....	[591]
Projected earnings........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[613]
The buy-back guarantee........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[629]
Mr Boyle’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[640]
Newsletters Nos 1 and 2........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[648]
Mr Boyle’s intention to resign........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[652]
THE CASE AGAINST MR FOSTER........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[670]
Generally........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[670]
Mr Foster’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[674]
Mr O’Brien’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[679]
The worldwide trial of the SensaSlim product........ ........ ........ ........ ........ ........ ........ .....	[683]
Projected earnings........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[694]
The buy-back guarantee........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[699]
Mr Boyle’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[701]
Newsletters Nos 1 and 2........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[707]
Mr Boyle’s intention to resign........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[711]
THE CASE AGAINST MR O’BRIEN........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[715]
Generally........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[715]
Mr Foster’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[722]
Mr O’Brien’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[728]
THE CASE AGAINST MR ADAMS........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[731]
Generally........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[731]
Mr Foster’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[741]
Mr O’Brien’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[748]
The worldwide clinical trial........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[753]
Mr Boyle’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[759]
THE CASE AGAINST MR BOYLE........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[767]
Generally........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[767]
Mr Foster’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[798]
Mr Boyle’s involvement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[808]
Newsletters Nos 1 and 2........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[822]
Mr Boyle’s intention to resign........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[825]
DISPOSITION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[828]

INTRODUCTION

1. This case concerns allegations of contravention of the Trade Practices Act 1974 (Cth) (after 1 January 2011, renamed the Competition and Consumer Act 2010 (Cth)) (the Act) and the Australian Consumer Law (Schedule 2 to the Act) in relation to the establishment of franchises for the sale and distribution of a claimed weight loss product in the form of an intra-oral spray marketed under the brand “SensaSlim”, which was also referred to as “SensaSlim Solution” (the SensaSlim product).  The brand “SensaSlim” is also referred to in the evidence as “Sensaslim”.  The alleged contraventions involve various instances of conduct said to have been misleading or deceptive or to be constituted by false or misleading representations.

   Overview

2. The first respondent, SensaSlim Australia Pty Ltd (in liq) (SensaSlim or the company) carried on what can be generally described as the SensaSlim business.  It claimed the right to do so from an agreement purportedly entered into with a company said to be called SensaSlim (Suisse) Limited.  Other evidence suggests that the relevant right was granted by a company said to be called SensaSlim International Limited.  SensaSlim granted franchises to persons described as Area Managers.  Each Area Manager was granted an exclusive right to distribute the SensaSlim product in a particular geographic area.  Each Area Manager paid $59,950 in relation to the acquisition of that right, although the sum paid corresponded with the purchase price of the stock of the SensaSlim product and, importantly, point-of-sale materials that were to be sold, distributed and used by that Area Manager.

3. The evidence (which I will come to discuss in more detail) shows that the establishment of the franchises with the various Area Managers involved a common pattern of conduct.  Generally, an advertisement would be placed in a newspaper circulating in a particular local area.  The advertisement revealed the availability of a business opportunity from which participants could earn over $4,000 per week, although sometimes the advertised sum varied.  There was a buyback guarantee.  The identity of the business and the product to be sold were not stated but, typically, persons interested in the opportunity were invited to call a particular telephone number for more information.  It is convenient to refer to the persons who responded to the advertisements as prospective franchisees.

4. In some cases, the advertised telephone number was in fact the number for an answering service which passed the prospective franchisee’s inquiry to a person engaged in the SensaSlim business as a Sales Manager.  Sometimes, that person was named in the advertisement.  The Sales Manager would contact the prospective franchisee and arrange an appointment to meet him, her or them.  Generally speaking, no real information was given about the business opportunity at the time of this initial inquiry.  In the course of the telephone call, information was obtained about the prospective franchisee.  The evidence shows that this was part of a vetting procedure, which I will discuss in greater detail below. 

5. At a subsequent meeting with the Sales Manager, the prospective franchisee was shown a DVD relating to, amongst other things, the development of the SensaSlim product, its characteristics, its advantages and its proven efficacy as a weight loss product (the SensaSlim DVD).  The SensaSlim DVD stood as a persuasive statement of why prospective franchisees should become involved with the product.  Importantly, the SensaSlim DVD reported that the SensaSlim product had been “trialled, tested and proven” in “the world’s largest weight loss trial”.

1. Also at the subsequent meeting, the Sales Manager would provide the prospective franchisee with some or all of the following, which I identify and describe below:

   ·the Franchising Code;

   ·the Area Manager Proposal;

   ·the KMB letter;

   ·the Robinson Legal letter;

   ·the Frequently Asked Questions document;

   ·the Disclosure Document;

   ·the Retail Business Opportunities document;  and

   ·the Price and Potency Advantages document.

2. The evidence makes clear that the prospective franchisee was taken though the Area Manager Proposal in some detail.

3. Typically, a short time after the meeting, the prospective franchisee was contacted by a person identifying himself as Peter O’Brien, said to be the Operations Director of SensaSlim.  A central issue in the proceeding is whether the second respondent, Peter Foster, assumed various identities including, on these occasions and other occasions, the identity of the third respondent, Peter O’Brien.  I am satisfied that he did.  Indeed, based on the evidence that I will discuss below, I am satisfied, on the balance of probabilities, that each time a prospective franchisee or an Area Manager dealt with “Peter O’Brien” in relation to the SensaSlim business, whether on the telephone or by correspondence, he or she was dealing with Mr Foster, who kept his true identity hidden from all but those intimately involved in establishing the SensaSlim business. 

4. If the prospective franchisee was considered to be suitable (and, generally speaking, all prospective franchisees appeared to be considered to be suitable unless they were considered to be potential “troublemakers”, often because of their past involvement with a weight loss product promoted by Mr Foster), they were invited to enter into a Franchise Area Manager Agreement with SensaSlim.  This required the prospective franchisee to execute the agreement and to pay half the fee for the franchise, with the balance to be paid at the time of a conference that was to be held to launch the SensaSlim product (the Area Managers’ Conference).  Originally, it was said that this conference would take place in about August 2010.  The Area Managers’ Conference actually took place in November 2010 at the Palazzo Versace Hotel on the Gold Coast.  Before Area Managers were permitted to enter the auditorium at the hotel to attend, they were required to pay the balance of their franchise fee.

5. The applicant’s case is that, in the course of establishing the franchises with the Area Managers, each respondent contravened the Act and the Australian Consumer Law in various ways, by engaging in certain conduct or making certain representations, or by being culpably involved in the contraventions of the Act or the Australian Consumer Law by others. I will refer to this conduct and to these representations in more detail below.

   The Franchising Code of Conduct

6. The Franchising Code of Conduct (the Franchising Code) is a prescribed and mandatory industry code for the purposes of s 51AE of the Act: see reg 3 of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth). It applies to a franchise agreement entered into on or after 1 October 1998: clause 5. It applies to the legal relationship between SensaSlim and each of its Area Managers.

7. Franchising is an industry for the purposes of Part IVB of the Act and franchisors and franchisees are taken to be participants in the industry of franchising, whether or not they are also participants in another industry: s 51ACA(3) of the Act.

8. For the purposes of the Franchising Code, a “franchise” includes the rights and obligations under a franchise agreement:  clause 3.  The term “franchise agreement” has the meaning given by clause 4, which relevantly provides:

   (1)       A franchise agreement is an agreement:
             (a)       that takes the form, in whole or part, of any of the following:

   (i)        a written agreement;

   (ii)       an oral agreement;

   (iii)      an implied agreement; and

   (b)in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and

   (c)under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:

   (i)owned, used or licensed by the franchisor or an associate of the franchisor; or

   (ii)specified by the franchisor or an associate or the franchisor; and

   (d)under which, before starting business or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:

   (i)        an initial capital investment fee; or

   (ii)       a payment for goods or services; or

   (iii)a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or

   (iv)      a training fee or training school fee;

   but excluding:

   (v)payment for goods and services at or below their usual wholesale price; or

   (vi)      repayment by the franchisee of a loan from the franchisor; or

   (vii)payment of the usual wholesale price for goods taken on consignment; or

   (viii)payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement.

   (2)For subclause (1), each of the following is taken to be a franchise agreement:

   (a)transfer, renewal, extension, or extension of the scope of a franchise agreement;

   (b)       a motor vehicle dealership agreement.

   (3)However, any of the following does not in itself constitute a franchise agreement:

   (a)       an employer and employee relationship;
             (b)       a partnership relationship;
             (c)       a landlord and tenant relationship;
             (d)       a mortgagor and mortgagee relationship;
             (e)       a lender and borrower relationship;

   (f)the relationship between the members of a cooperative that is registered, incorporated or formed under any of the following laws:

   (i)        Co-operatives Act 1992 of New South Wales;

   (ii)       Co-operatives Act 1996 of Victoria;

   (iii)      Cooperatives Act 1997 of Queensland;

   (iv)Co-operative and Provident Societies Act 1903 of Western Australia;

   (v)       Co-operatives Act 1997 of South Australia;

   (vi)      Co-operative Industrial Societies Act 1928 of Tasmania;

   (vii)Co-operative Societies Act 1939 of the Australian Capital Territory;

   (viii)     Co-operatives Act 1997 of the Northern Territory;

   (ix)the Corporations Act 2001.

9. A franchisor must give a copy of the Franchising Code, a disclosure document and the franchise agreement in the form in which it is to be executed to a prospective franchisee at least 14 days before the prospective franchisee enters into a franchise agreement or an agreement to enter into a franchise agreement, or makes a non-refundable payment to the franchisor or an associate of the franchisor in connection with the proposed franchise agreement:  clause 10.

10. If the franchised business has an expected annual turnover of $50,000 or more at any time during the term of the franchise agreement, the disclosure document must be in accordance with Annexure 1 to the Franchising Code and be signed by the franchisor, or a director, officer or authorised agent of the franchisor:  clause 6(2).  As will become clear below, the evidence in the present case shows that the expected annual turnover for each Area Manager was in excess of $50,000 per annum.

11. Clause 6A of the Franchising Code sets out the purposes to be fulfilled by a disclosure document:

    The purposes of a disclosure document are:

    (a)to give to a prospective franchisee, or a franchisee proposing to enter into, renew, extend or extend the scope of a franchise agreement, information from the franchisor to help the franchisee to make a reasonably informed decision about the franchise; and

    (b)to give a franchisee current information from the franchisor that is material to the running of the franchised business.

12. Annexure 1 to the Franchising Code is very prescriptive of the information to be provided in a disclosure document and the form in which that information is to appear.  It requires the provision of a number of details about a franchisor.  The details include the name and address of each associate of the franchisor that is not a body corporate, and the name, position held and qualifications (if any) of each officer of the franchisor:  see items 2.5 and 2.6, respectively, in Annexure 1.

13. Relevantly, clause 3(1) of the Franchising Code defines the term “associate” as follows: 

    associate, for a franchisor, means a person:
    (a)       who:

    (i)is a director or related body corporate, or a director of a related body corporate, of the franchisor; or

    (ii)for a franchisor that is a proprietary company — directly or indirectly owns, controls, or holds with power to vote, at least 15% of the issued voting shares in the franchisor; or

    (iii)      is a partner of the franchisor; and

    (b)whose relationship with the franchisor is relevant to the franchise system, including supplying goods, real property or services to a franchisee.

14. The Franchising Code also adopts the meanings given by the Corporations Act 2001 (Cth) (the Corporations Act) to a number of terms, including “director” and “officer”: clause 3(2). In that connection, s 9 of the Corporations Act provides:

    director of a company or other body means:
    (a)       a person who:

    (i)        is appointed to the position of a director; or

    (ii)is appointed to the position of an alternate director and is acting in that capacity;

    regardless of the name that is given to their position; and

    (b)unless the contrary intention appears, a person who is not validly appointed as a director if:

    (i)        they act in the position of a director; or

    (ii)the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.

    Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.

    Note:Paragraph (b)—Contrary intention—Examples of provisions for which a person referred to in paragraph (b) would not be included in the term “director” are:

    •           section 249C (power to call meetings of a company’s members)

    •           subsection 251A(3) (signing minutes of meetings)

    •           section 205B (notice to ASIC of change of address).

    …

    officer of a corporation means:
    (a)       a director or secretary of the corporation; or
    (b)       a person:

    (i)who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

    (ii)who has the capacity to affect significantly the corporation’s financial standing; or

    (iii)in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation); or

    (c)       a receiver, or receiver and manager, of the property of the corporation; or
    (d)       an administrator of the corporation; or

    (e)an administrator of a deed of company arrangement executed by the corporation; or

    (f)       a liquidator of the corporation; or

    (g)a trustee or other person administering a compromise or arrangement made between the corporation and someone else.

    Note:    Section 201B contains rules about who is a director of a corporation.

    The SensaSlim DVD

15. At this point, it is convenient to summarise the content of the SensaSlim DVD that was used as an important sales tool in the meetings between the Sales Managers and prospective franchisees.  In later sections of these reasons, I record the evidence about how and by whom the SensaSlim DVD was made.

16. The central character in the SensaSlim DVD is the presenter, Tony Murphy, who is the vehicle through whom the development of the SensaSlim product is described and explained, aided by a pastiche of commentary from persons ostensibly holding positions with SensaSlim Suisse;  excerpts from television news, current affairs and talk-show programs (mostly of United States origin including the Oprah Winfrey Show);  scientific information and explanations given by persons identified as academics or clinicians from various institutions;  and academic opinion on the value of celebrity endorsement.  Careful analysis indicates that much of this material is not directed specifically to the SensaSlim product or, indeed, directed to it at all.  Rather, it has been woven into the fabric of the SensaSlim “story” recounted by Mr Murphy and those ostensibly employed by SensaSlim Suisse.  In this way, the material gives the impression of providing solid support for the statements made about and the benefits claimed for the SensaSlim product. 

17. The SensaSlim DVD commences with a few words of welcome from Mr Murphy, after which he says:

    To secure your financial future fast, it’s been said that you first must identify a problem that affects many people and then offer them the solution that they all seek.  I’m here to tell you about an epidemic that is sweeping the world.  It affects every age group in every race in both genders and doesn’t discriminate between rich and poor.

18. Mr Murphy then explains that “this epidemic” has given rise to “a multi-billion dollar industry” that “produces enormous profits”.  The “good news” for people who suffer from “this disease” is that “we have the solution”.  The “even better news” is that “you [the prospective franchisee] can share in our success”.

19. The SensaSlim DVD goes on to describe the problem of obesity with brief reference to a discussion in Time magazine and the Australian 60 Minutes television program.  It also uses excerpts from news and current affairs reports on obesity (including commentary from medical practitioners apparently specialising in obesity) taken from United States television programs (including ABC News, Larry King Live on CNN, and CNBC News) and British television programs (including SKY News and BBC News).  These excerpts include reportage of an initiative by the United States First Lady, Michelle Obama, to tackle childhood obesity.

20. The SensaSlim DVD reports that, in the United States of America, US$59 billion was spent on weight loss programs in one year alone.  Data is then given about the problem of obesity in Australia, including a voice-over by Mr Murphy stating that “Australia now weighs in as the world’s most overweight nation, passing the United States”.  He states that over $1 billion is spent each year in Australia on diet aids as part of a quest to lose weight.

21. Having identified the problem of obesity, the SensaSlim DVD describes, through Mr Murphy, the search for a “cure” and how this was regarded by “the pharmaceutical industry” as “the search for the Holy Grail”.  Mr Murphy explains that “the company that could come up with the cure would get very rich very quickly”.

22. Mr Murphy relates how an accidental discovery over 20 years ago by an Italian dentist “led scientists down one fascinating path of research into obesity” and, simultaneously, how “a Swiss pharmaceutical company made an exciting breakthrough” with the discovery of a natural ingredient that promotes safe weight loss.  Elsewhere in the SensaSlim DVD, this Swiss company is identified as Hoffmann La Roche.  The discovery is said to have been based on research conducted at Brandeis University in the United States.  Mr Murphy explains that it was the combination of these “two remarkable bodies of scientific research” which led to the “ultimate weight loss product available in the world today”:  the SensaSlim product.

23. The ingredients in the SensaSlim product are then described in some detail.  The first is said to be “a gift from nature” – the rind of a small tropical fruit (Garcinia cambogia) that people in southern Asia have made part of their diet for centuries.  The rind is said to contain “a rare natural compound” which is hailed as “nature’s perfect diet ingredient”.  The active compound is identified as (-) Hydroxycitric Acid” (HCA).  HCA is said to be an “extraordinary” organic compound “clinically … very similar to the citric acid found in oranges but with a unique difference”.  The compound acts to curb appetite, reduce food intake and inhibit the production of fat and cholesterol.  Mr Murphy relates that, as it is safe, effective and natural, “SensaSlim of Geneva, Switzerland” took this “gift from nature” and used it as the key compound in the development of its breakthrough weight loss product.

24. This is followed by commentary from a man identified as Martin Prisse, Research Director of SensaSlim Suisse, who explains that SensaSlim took this discovery as its “starting point”.  There is some scientific commentary from a person said to be Dr John Lowenstein of Brandeis University.  Dr Lowenstein is referred to as the discoverer of HCA’s effects. 

25. The SensaSlim DVD stresses the safety of HCA, particularly its lack of adverse side effects.  Mr Murphy also refers to an independent study conducted by “La Roche” (presumably a reference to Hoffman La Roche) on the use of HCA in appetite suppression with no “rebound” effect.  An image of a paper entitled “Effect of (-)-Hydroxycitrate upon the Accumulation of Lipid in the Rat:  II.  Appetite” is displayed.  The authors of the paper are identified as associated with Hoffmann La Roche Inc.  Mr Murphy refers to the release of HCA “to the US market” as “hugely successful”.  This is underscored by excerpts from a number of news items on United States television programs concerning HCA and its use in the pursuit of weight loss.  Mr Murphy continues:

    The challenge for SensaSlim scientists was to push the boundaries and seek perfection by incorporating highly effective active ingredients that would work in harmony with HCA to accelerate weight loss.

26. This is the entrée for Mr Murphy and others in the SensaSlim DVD to discuss the “breakthrough” creation of a “unique formulation of a highly sensitive and exceptionally effective blend of five compounds”.

27. At this point, chromium is identified as the second active ingredient.  Martin Prisse explains that, when combined with chromium, HCA is up to “700% more effective in promoting weight loss”.  The third ingredient is then identified as levocarnitine.  The role of this compound in weight loss is briefly explained.  Martin Prisse then stresses the importance of combining these ingredients into a liquid formulation, not as a diet pill, so that they can “enter the bloodstream and work fast”.

28. Mr Murphy explains that intra-oral sprays offer “the most effective delivery systems”.  He refers to a study by “the prestigious Physicians’ Desk Reference journal” that “proves that intra-oral sprays are the most effective method of delivery available”, working nine times faster than pills.  In this way, he says, the SensaSlim product enters the bloodstream at “its highest potency level”.  Mr Murphy says that, once again, “the media were quick to report the news”.  This statement is followed by a further excerpt of a current affairs item from a United States television program, on the therapeutic use of intra-oral sprays. 

29. Mr Murphy explains that “this is only part of the story”.  He continues:

    You see, what makes SensaSlim unlike anything that’s ever been seen before is not just the extraordinary active ingredients and the liquid formulation in an intra-oral spray.  SensaSlim is the only product to act on not one but four key parts of the body:  the stomach, the mouth, the nose and the brain.

1. Mr Murphy then discusses how Swiss neuroscientists believe they have developed the easiest and most effective way to lose weight because of a “mistake” made by an Italian dentist who accidentally overdosed a patient on novocaine.  This is said to have had the consequence of novocaine entering the patient’s bloodstream and desensitising his taste buds.  The patient reported an immediate loss of interest in food, leading to the patient losing a “remarkable amount of weight”.  Reference is made to the belief of scientists that this could be “the dieter’s dream”:  “the ability to fool the brain into a feeling of fullness and satiety without the calories”.

2. Commentary is then given by a man identified as Mathieu Racine, Biotechnologist with SensaSlim Suisse.  Mathieu Racine speaks of “taste blindness”, which he describes as an altered sense of taste.  This is, according to Mathieu Racine, a temporary condition manifested by a loss of taste perception by the taste buds on the tongue which makes it more difficult to eat.  After a while, the appetite dwindles and the subject feels unenthusiastic about eating, leading to weight loss.

3. Martin Prisse explains that, in the SensaSlim product, this desensitisation is caused by “a natural herb” – oil of clove.  He says that this desensitisation sends a message to the brain that suppresses appetite without affecting the central nervous system.

4. The fifth ingredient, Gymnema sylvestre, is then introduced by Martin Prisse.  He discusses how this substance, apparently, eliminates the ability to taste sugar in the mouth, thereby reducing the craving for sugar.  Martin Prisse says that this substance also suppresses glucose absorption and “can lower the effects of blood sugar”.

5. Martin Prisse then discusses how the SensaSlim product is administered.  This is done three times per day by three sprays onto the tongue, 10 minutes before meals.  He says that the effect of the formulation is felt “immediately” and the suppression of appetite is “swift”.

6. Mr Murphy says that the “news” that “taste buds affect eating habits” caught the attention of “Oprah Winfrey’s regular star health expert, Dr Oz”.  There is an extract from a segment by Dr Oz on how “fat is an acquired taste” and taste buds can be “train[ed]”.

7. Further commentary is provided by Mathieu Racine on how you can “[l]ose weight whilst you sleep”.  He says that the SensaSlim product “fool[s] the brain into believing that you’re full”.  He says that “if you don’t think of food, you don’t crave food, you don’t eat food, the weight just drops off”.

8. Mr Murphy talks about how the SensaSlim product continues to work during periods of sleep.  He says that “psychological dream research” reveals that people dream of food which creates a “food craving” that confronts the person on waking, leading to a regular “breaking” of diets.  There is short commentary from a man identified as Professor Patrick McNamara from Boston University on the relation of dreams to human nature.  Mathieu Racine then says that the SensaSlim product gives the user the willpower to lose weight, even when sleeping, by stimulating a “sensory area in the brain” to “remov[e] the perception of dieting”.

9. Mr Murphy talks about how taste is affected by the ability to smell.  This is followed by Martin Prisse talking about the smell of food and its relationship to overeating.  This is used to introduce yet another ingredient in the SensaSlim product, which Martin Prisse describes as “a carefully guarded secret”.  He says that a secret ingredient – a scent – sends a message to the brain that the user is satisfied.  Mathieu Racine reinforces this by saying that “[i]t makes anatomic sense that odours can affect appetite, because the part of the brain that we think smells, the olfactory lobe, is directly connected to the ventromedial nucleus of the hypothalamus, which is the satiety centre”.

10. Mr Murphy says that “news of the breakthrough” on “how to train your brain with smell” was “widely reported” and was “rewarded with the Nobel Prize for Medicine”.  Mr Murphy says that, if this was not enough recognition, “it even had Oprah screaming to try it”.  The “it” is not identified.  There is a suggestion that the “it” is the SensaSlim product.  However, an accompanying segment from the Oprah Winfrey Show shows that, in fact, Ms Winfrey was engaging with the proposition (which Ms Winfrey appears to treat as somewhat fanciful) that smelling bananas, green apples or peppermint can lead to weight loss.

11. Mr Murphy then explains how “Oprah, like the rest of the world” had to wait “several more years” before the SensaSlim product could be “trialled, tested and proven”.  This reinforces the suggestion that the “it” that “had Oprah screaming to try it” was the SensaSlim product.  There is other evidence, which I will note below, that shows that steps were taken by those running the Area Managers’ Conference to perpetuate an apparent association between Oprah Winfrey and the SensaSlim product.   

12. The SensaSlim DVD then goes on to describe in detail how, after “finally perfecting the formulation”, “the largest weight loss trial worldwide” was conducted in 2007 before the product’s intended release to consumers in 2010. 

13. At this point, a further representative of SensaSlim Suisse is introduced into the narrative of the SensaSlim DVD.  This representative is identified as Nicholas Billon, Clinical Trial Analyst.  He explains that the majority of trials on weight loss products are completed on sample sizes that are too small and for durations that are too short, with the consequence that “the results therefore cannot be accepted as reliable and significant to any degree”.  He says that SensaSlim Suisse set a minimum target of “10,000 independent overweight participants from over 100 countries worldwide”.  Nicholas Billon explains that, unlike other companies whose results are “obtained in secret closed weigh‑in sessions controlled by the manufacturer”, the results in the SensaSlim trial were “obtained by the participant themselves” with all results posted on the internet “for transparency”.  He says that “the aim was to have set a new standard in testing the efficacy of weight loss products before selling to consumers”.  He continues:

    Believing that SensaSlim was truly the most effective weight loss product available in the world today we wished to be able to make this claim based on unquestionable trials and proven results.  In January 2008 the SensaSlim trial was launched in Europe.  Press releases were published in media announcing the world’s largest human trial and inviting consumers to log into our website and join the trial for free.  After six months, the study was enlarged and went worldwide seeking participants from over 100 countries.  Ultimately 11,453 people completed the trial.  They were given no special instructions about food to eat or avoid and they were told not to change their exercise habits.

14. Mr Murphy continues:

    The world’s largest weight loss trial was an outstanding success.  The results confirmed that SensaSlim is unquestionably the most effective weight loss product available in the world today.

15. Nicholas Billon then says that some participants lost “45 kilos” in the six-month study.  In fact, he says, a side effect of using the SensaSlim product was “excess weight loss”.  Some participants had to be dropped from the study because they became underweight.  He reports that the average weight loss was “2.5 kilos” per month or “15 kilos” over the trial.  The average participant lost about 16.9% of their body weight and there was no significant “yo-yo effect” when participants completed the trial.  Participants did not put their weight back on.  Nicholas Billon says that “[m]ost impressive of all” is that 87.2% of subjects lost 10% or more of their weight.

16. There is then discussion about the packaging of the SensaSlim product being created by one of Europe’s “leading design agencies”.  The packaging is referred to as “chic”.  The viewer is told that valuable and insightful information “written by some of the world’s foremost health experts” accompanies the product.

17. Mr Murphy then discusses how the viewer can become an Area Manager who will secure the right to distribute the SensaSlim product in a “protected territory”.  Information is provided about the assistance to be given to Area Managers, such as the provision of a portable DVD player to show a four‑minute corporate sales video to retailers.  Mr Murphy tells the prospective franchisee that this DVD “explains everything they [retailers] need to know about SensaSlim and why they must stock it”.  He says that “all you have to do is press play”.  The DVD “does all the selling”.  A graphic states that no sales experience is needed. 

18. Mr Murphy also outlines the responsibilities of an Area Manager.  These responsibilities appear to be limited to restocking display stands for the SensaSlim product once a week and replacing promotional materials at the premises of retailers of the SensaSlim product. 

19. Mr Murphy says that there will be conferences and seminars and that Area Managers will be provided with “steady support to ensure your swift success”.  There will be an advertising and publicity “push” that “will send SensaSlim into orbit”. 

20. There is also some short commentary provided by a person identified as Professor Mark Ritson from the London Business School on the value of celebrity endorsement.  This is followed by commentary provided by a woman identified as Elsa Robin, Lifestyle Specialist with SensaSlim Suisse.  She explains how celebrity endorsement will be used to promote the SensaSlim product in Australia, including by reference to Australian sporting heroes.  Elsa Robin also explains that there will be a campaign to educate about childhood obesity.

21. At this point, the SensaSlim DVD returns to “the epidemic of childhood obesity”.  Excerpts from United States television programs are shown including part of an interview with and speech by Mrs Obama and footage of President Obama signing a memorandum establishing a taskforce on childhood obesity.

22. Mr Murphy makes reference again to a national advertising and promotional campaign in Australia for the SensaSlim product.  He says that SensaSlim will be inviting “some of Australia’s greatest sporting heroes to visit schools in Area Managers’ territories to explain education strategies regarding healthy food choices, activity options, obesity trends as well as support of behavioural change strategies”.  Images of well-known Australian sporting identities are shown.  The suggestion is that these identities will be among those invited to participate in this activity.  Mr Murphy says that the SensaSlim product will be supported by “a comprehensive national advertising and promotional campaign featuring television, newspapers and quality women’s magazines”.   

23. Mr Murphy says that “SensaSlim is not a company to rest on its laurels”.  The “research, development and supply of new products is fundamental to our future”.   He explains that new products will be supplied on a regular basis.  He says that a second product to complement the SensaSlim product has been developed and will be available for distribution exclusively by Area Managers.  These products will be “manufactured to exacting standards in our TGA-approved laboratories”.

24. Mr Murphy then suggests that “now is probably a good time to further discuss this proposal with our Sales Manager”.  The SensaSlim DVD ends with the slogan:  “Nothing tastes as good as slim feels”.

25. On the basis of the evidence which I will discuss below concerning the creation of the SensaSlim DVD (see [256]-[289]), I am satisfied that Mr Murphy was hired as a presenter for the purpose of making the SensaSlim DVD.  There is no evidence to suggest that he has or had any association with SensaSlim or the SensaSlim product beyond performing this role.  I am also satisfied on the basis of this body of evidence that the persons identified as holding roles in and speaking for SensaSlim Suisse – Martin Prisse, Mathieu Racine, Nicholas Billon and Elsa Robin – were actors, once again hired for the purpose of making the SensaSlim DVD.  I am satisfied that none of them holds any position with a company or business called SensaSlim Suisse, let alone the position assigned to him or her in the SensaSlim DVD. 

26. I am satisfied on the basis of this body of evidence that Mr Murphy and each of these actors merely played the role that had been assigned to and scripted for each of them.  I am satisfied that the scripts for these individuals were prepared substantially by Mr Foster, who also had overall control over and responsibility for making the SensaSlim DVD.  I am satisfied that the SensaSlim “story”, as told in the SensaSlim DVD and other materials supplied to prospective franchisees, was his creation. 

27. Further, as I will come to explain, the evidence makes clear that there was no trial of the SensaSlim product as reported in the SensaSlim DVD and in other materials provided to prospective franchisees, including the Area Manager Proposal.  I am satisfied that the asserted worldwide trial of the SensaSlim product was a fabrication by Mr Foster intended to lead prospective franchisees into the false belief that the efficacy of the SensaSlim product as a weight loss product had been established scientifically.  I am satisfied that this was done with the ultimate aim of inducing prospective franchisees to become Area Managers and to purchase stock of the SensaSlim product for supply to retailers such as chemists, health and beauty parlours, health food stores and fitness centres as a genuine weight loss product. 

28. To be clear, there is no evidence in this proceeding of any study or trial that establishes that the SensaSlim product has efficacy as a weight loss product or that it possesses any of the benefits asserted in the SensaSlim DVD.  There is, moreover, no other reason to believe on established objective grounds that the SensaSlim product is an efficacious weight loss product or has the benefits asserted in the SensaSlim DVD.

    Description of the documents

29. It is now convenient to describe a number of the key documents which the evidence indicates were given to prospective franchisees when they were given a sales presentation by a SensaSlim Sales Manager.

    The Area Manager Proposal

30. This document is 46 pages in length and includes a franchise application form requesting SensaSlim to consider the applicant for the position of Franchise Area Manager for a particular territory.

31. The front page contains a number of details, including the following:

    AREA MANAGER PROPOSAL

    COMPANY DETAILS:  SensaSlim Australia Pty Ltd
      (ABN: 32 140 333 133)

    Registered Address:                Level 29
      Chifley Tower
      2 Chifley Square
      Sydney, NSW 2000
      AUSTRALIA

    TELEPHONE:  [phone]
    FACSIMILE:  [phone]
    E-MAIL:  [email protected]
    WEB SITE:   DIRECTOR:            Michael Boyle BBus (Finance & Banking)

    OPERATIONS DIRECTOR:    Peter O’Brien

    ACCOUNTANTS:                 KMB Business Advisors & Chartered Accountants
      Level 15, 37 York Street, Sydney, NSW 2000

    SOLICITORS:  Robinson Legal
      Level 4, 430 Kent Street, Sydney, NSW 2000

    BANKERS:  Commonwealth Bank
      48 Martin Place, Sydney, NSW 2000

32. The first numbered page contains a heading “MEET OUR SENIOR DIRECTOR”, under which there is a photograph of the fifth respondent, Michael Boyle.  The following information is given with respect to Mr Boyle (errors in original):

    Michael is an associate director of UBS Wealth Management Australia Ltd, a subsidiary of UBS one of the world’s leading Swiss investment banks.  UBS was the result of the merger of the Union Bank of Switzerland and the Swiss Bank Corporation.

    UBS is a diversified global financial services company, with its main headquarters in Basel and Zürich, Switzerland.  It is the world’s second largest manager of private wealth assets, and is also the second-largest bank in Europe, by both market capitalisation and profitability.

    Michael has a Bachelor of business - banking and finance specialising in funds management.  He is currently completing a Masters of applied Finance.

    He is PS146 compliant as required by the ASIC.  He is an accredited derivatives specialist.

    Michael worked on the trading floor of Deutche Bank in London, one of the world’s leading financial services providers.  He returned home to further his career with Australia’s premier investment bank, Macquarie Bank, where he worked for over 8 years before joining UBS.

    Michael obtained the Australian master franchise for SENSASLIM™ and now oversees its establishment.  He lives in Sydney.

33. This is followed by a column headed “PERSONALLY SPEAKING” which states:

    Congratulations, you have taken the first step towards securing financial independence.

    We are dedicated to providing innovative, healthful products that will not only improve the quality of people’s lives but will help them to feel better about themselves.

    We are committed to providing a financially secure future for our Area Managers by building upon a solid foundation of strong brands and quality products that are thoroughly researched and dexterously marketed.

    This will enable our customers and distributors to live healthier, happier lives through better nutrition and financial stability.

    I hope you join us in this inspiring project.

    Yours Sincerely,

    [Signature]

    Michael Boyle
    Senior Director

34. The evidence shows, and it does not appear to be disputed, that the purported signature of Mr Boyle has been affixed electronically to the document.  The signature appearing on the document was not admitted as evidence of the fact that Mr Boyle had placed his signature on it or, indeed, that it was his signature at all.  

35. In general terms, the Area Manager Proposal provides an overview of the creation of a distribution network for the SensaSlim product (in which an Area Manager could be expected to earn in excess of $3,000 per week), set against the backdrop of information on obesity, the profitability of the health and diet industry and the use of traditional, complementary and alternative medicines.

36. The document then progresses to discuss the origins of the SensaSlim product and to identify its unique selling point as its formulation, mode of delivery and mode of action.  In that connection, the document states:  

    Until now most diet products have been manufactured in the form of tablets, powders, bars or shakes.  The SENSASLIM™ weight loss programme is in the form of a revolutionary Intra-Oral Spray.

    The unique formulation is a combination of five of the most thoroughly researched weight loss ingredients over the past 30 years.

    The potent active ingredients enter the blood stream and naturally suppress the appetite.  Simultaneously, the taste buds are pleasantly desensitised by a natural herb, oil of clove (Syzygium aromaticum) which acts as a temporary local anaesthetic.  This sends a message to the brain that suppresses the appetite, without affecting the central nervous system.

    SENSASLIM™ is administered three times a day, at the user’s convenience, by three sprays onto the tongue, ten minutes before meals. The effect of the formulation is felt immediately and suppression of appetite is swift.  There have been no adverse side effects recorded.

37. The document states that SensaSlim “[w]orks 9 times faster than pills”.  It refers to “[t]aste buds research featured on Oprah’s Dr. Oz”.  The “five primary ingredients” are described as “totally natural and have been successfully tested and trialled, producing outstanding results in improving weight control”.

38. These ingredients are identified as HCA (described as extracted from a rare fruit grown in south-east Asia called Garcinia cambogia, more commonly known as “a fat fighting fruit”), chromium (described as a vital molecule in regulating carbohydrate metabolism by enhancing insulin function for proper use of glucose in the body), levocarnitine (described as responsible for maintaining energy metabolism throughout every cell in the body), oil of clove (Syzygium aromaticum) (described as a natural analgesic and antiseptic used primarily in dentistry for its main ingredient, eugenol, for dental pain relief) and Gymnema sylvestre (described as a herb native to the tropical forests of southern and central India where it has been used as a naturopathic treatment for diabetes for nearly two millennia).  The benefits of intra-oral sprays as an efficient delivery system for medication are discussed. 

1. In the circumstances, I am satisfied that the applicant has established that Mr Boyle was knowingly concerned in and party to the contravention I have found at [669].

   DISPOSITION

2. At this stage of the proceeding, the applicant seeks declaratory and certain injunctive relief.  The parties have made some submissions on these matters, but I wish to hear from them further on that question after they have had the benefit of considering my findings and reasons.  It will also be necessary for directions to be made concerning the further hearing of the proceeding in relation to other relief sought by the applicant, including in respect of penalties, compensation orders and banning orders.

3. The only orders I will make at the present time are that the applicant serve on all respondents, on or before 29 April 2014, a draft of the orders and directions it proposes at the present time.  Each respondent is to notify the applicant in writing, on or before 13 May 2014, as to whether or not he or it opposes the making of the draft orders and directions.  If any respondent opposes the making of the draft orders and directions, that respondent is to serve on the applicant, at the same time, a draft of the orders and directions that that respondent proposes.  Copies of all documents served are to be provided to my Associate by the party serving the document at the time that the document is served.

4. Further, if the applicant is of the view that it has pleaded a cause of action which I have not addressed and determined in these reasons, it is to give written notice of that fact to my Associate and to each respondent at the time of serving its draft orders and directions. 

5. The proceeding will be listed on 21 May 2014 at 9.30am for directions only.

I certify that the preceding eight hundred and thirty-one (831) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Associate:

Dated:  8 April 2014