Husseini v Girchow Enterprises Pty Ltd - [2024] FCAFC 143

FEDERAL COURT OF AUSTRALIA
Husseini v Girchow Enterprises Pty Ltd [2024] FCAFC 143

Appeal from:
Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420

Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500

File number: NSD 551 of 2023

Judgment of: SARAH C DERRINGTON, STEWART AND FEUTRILL JJ

Date of judgment: 12 November 2024

Catchwords: CONSUMER LAW – appeal from judgment where appellant found jointly and severally liable to pay damages under s 236 of the Australian Consumer Law – misleading and deceptive conduct under s 18 of the ACL – characterisation of conduct in context – misleading representations in Franchising Code of Conduct disclosure document – effect of disclaimers and qualifications – whether representations objectively misleading or deceptive or likely to mislead or deceive – whether representees subjectively misled or induced to enter into transactions – caution in accepting conclusionary and opportunistic evidence as to reliance – causation for the purposes of s 236 of the ACL

Legislation:
Australian Consumer Law ss 4, 4(1), 4(2), 18, 18(1), 236, 236(1), Chs 2, 3, 4

Competition and Consumer Act 2010 (Cth) ss 51AE, 131, 139B, 139B(2), 139G, 140B, Sch 2; Ptt IVB, XIAA

Trade Practices Act 1974 (Cth) ss 51A, 82, 87

Competition and Consumer (Industry Codes – Franchising) Regulations 2014 (Cth) reg 4

Fair Trading Act 1987 (NSW) ss 18(1), 27, 28, 68

Fair Trading Act 2010 (WA) ss 18, 19

Cases cited:
3Meg.Com Pty Ltd v TM & SM Pike Pty Ltd [2012] WASCA 128; 43 WAR 350

Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; 221 CLR 568

Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119

Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45

Australian Securities and Investments Commission v Narain [2008] FCAFC 211; 169 FCR 211

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592

Campell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304

Chappel v Hart [1998] HCA 55; 195 CLR 232

Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

DL v The Queen [2018] HCA 26; 266 CLR 1

Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22

Frigger v Trenfield (No 3) [2023] FCAFC 49

Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 167; 2 FCR 82

Gould v Vaggelas [1984] HCA 68; 157 CLR 215

Henville v Walker [2001] HCA 52; 206 CLR 459

Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109

Jones v Dunkel [1959] HCA 8; 101 CLR 298

Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 54; ATPR (Digest) 46-048

Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] AC 883

March v E & MH Stramare Pty Ltd [1991] HCA 12; 171 CLR 506

Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494

Medlin v State Government Insurance Commission [1995] HCA 5; 182 CLR 1

North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217

Pico Holdings Inc v Voss [2004] VSC 263

Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131; 220 ALR 211

Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd [1993] FCA 192; 41 FCR 229

Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195

Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332

Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233

Tomasetti v Brailey [2012] NSWCA 399

Travel Compensation Fund v Robert Tambree (t/as R Tambree & Assocs) [2005] HCA 69; 224 CLR 627

Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514

Water Board v Moustakas [1988] HCA 12; 180 CLR 491

Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447

Yorke v Lucas [1985] HCA 65; 158 CLR 661

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 255

Date of hearing: 27 February 2024

Counsel for the Appellant: Mr M Condon SC

Solicitor for the Appellant: KDA Legal Pty Ltd

Counsel for the First to Eighth Respondents: Dr A Greinke with Mr S Lamb

Solicitor for the First to Eighth Respondents: Magnolia Legal Pty Ltd

ORDERS

NSD 551 of 2023

BETWEEN:
SAMER HUSSEINI

Appellant

AND:
GIRCHOW ENTERPRISES PTY LTD

First Respondent

KARIM GIRGIS

Second Respondent

SHERIF ELHAMY WADIE GIRGIS (and others named in the Schedule)

Third Respondent

ORDER MADE BY:

SARAH C DERRINGTON, STEWART AND FEUTRILL JJ

DATE OF ORDER:

12 NOVEMBER 2024

THE COURT ORDERS THAT:
1.The appeal be allowed and the orders of 12 May 2023 be varied such that:
(a)paragraph 3 of the orders be: ‘The first and second respondents pay $1,789,848.99 compensation to the first applicant, inclusive of interest to 12 May 2023’;
(b)paragraph 6 of the orders be: ‘The first and second respondents pay $1,955,996.29 compensation to the fifth applicant, inclusive of interest to 12 May 2023’;
(c)paragraph 9 of the orders be: ‘The first and second respondents pay $1,485,643.10 compensation to the eighth applicant, inclusive of interest to 12 May 2023’;
(d)paragraph 14 of the orders be: ‘The claims against the third and fourth respondents be dismissed’; and
(e)paragraph 17 of the orders be: ‘The first and second respondents pay the applicants’ costs of and incidental to these proceedings, including the costs of the cross-claim but excluding the costs of the claims against the fourth respondent, and in the absence of an agreement to be taxed on a party and party basis up to 11:00am on 9 March 2020 and thereafter, on an indemnity basis’.

2.The parties’ costs in the proceeding below, including the costs of the cross-claim, be reserved and, otherwise, the respondents pay the appellant’s costs of the appeal to be taxed if not agreed.
3.Within 14 days of these orders:
(a)the appellant file any agreed minute of proposed orders; or
(b)the parties file and serve competing minutes of proposed orders together with short written submissions (not exceeding three pages) in support of the relevant party’s minute of proposed orders,

addressing the parties’ costs in the proceeding below, including the costs of the cross-claim.

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

REASONS FOR JUDGMENT
SARAH C DERRINGTON J:

I agree with the reasons and orders of Feutrill J.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.
Associate:
Dated: 12 November 2024
REASONS FOR JUDGMENT
STEWART J:

I agree with the proposed orders and reasons of Feutrill J.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Stewart.
Associate:
Dated: 12 November 2024

REASONS FOR JUDGMENT
FEUTRILL J:
INTRODUCTION

The appellant appeals from a judgment by which he, together with the ninth and tenth respondents, is jointly and severally liable to pay damages to the first, fifth and seventh respondents. The primary judge found that each of the appellant and the tenth respondent, as individuals, and through them the ninth respondent, as a corporation, had engaged in misleading conduct in contravention of s 18 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth), as principal wrongdoers. Further, that each of the wrongdoers was liable to compensate the first, fifth and seventh respondents under s 236 of the ACL for loss or damage the relevant respondents had suffered because of the contraventions.
The corporate wrongdoer was the sub-franchisor of the Ultimate Fighting Championship (UFC) Gymnasium franchise in Australia. The master franchisor was a company evidently incorporated in the United States of America. The primary judge found that the first to seventh respondents were induced by misleading conduct to enter into franchise agreements and guarantees with the sub-franchisor and to establish UFC Gyms at Balcatta in Western Australia and Blacktown and Castle Hill in New South Wales. The UFC Gym franchise businesses were financial failures, and the relevant respondents lost the entire value of the capital they had invested in the businesses and also incurred trading losses while unsuccessfully attempting to operate the businesses profitably.
The issues in the appeal concern the characterisation of conduct for the purposes of s 18 and the causation of loss or damage for the purposes of s 236 of the ACL. The tenth respondent engaged in the majority of the conduct that the primary judge found was misleading. The appellant’s conduct was largely confined to signing, as director, a disclosure document that the franchisor was required to prepare and give to prospective franchisees under the Franchising Code of Conduct. The primary judge found that the disclosure documents contained misleading representations about the range of likely costs a prospective franchisee would incur when establishing a new UFC Gym franchise business. Those misleading representations contributed to inducing the relevant respondents to enter into the franchise agreements and guarantees that were financially disadvantageous to them.
Broadly, the issues in the appeal boil down to four questions to be answered with respect to the franchises established at the three separate locations.
(1)Were misleading representations made by the appellant in the disclosure documents about the range of costs for establishing new franchise businesses? Here, the question relates to characterising statements about the range of establishment costs in the context of the document as a whole. That requires consideration of the source of the information in the disclosure documents, the effect of disclaimers and qualifications about the quality of the information in them and the extent to which the appellant made any statement referrable to the particular costs the relevant franchisee would incur at a particular location if a franchise business were established.
(2)Were any misleading representations of the appellant, in context, conduct that was objectively misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL? Here, the question relates to the whole context in which the disclosure documents were given to the relevant respondents and includes the statements or representations of the tenth respondent and other agents of the ninth respondent (franchisor) that qualified or superseded statements made in the disclosure documents.
(3)Were the relevant respondents subjectively misled and induced by the appellant’s individual conduct in contravention of s 18(1) of the ACL to enter into the franchise agreements and guarantees? Here, the question relates to whether the appellant’s conduct was any real inducement for the relevant respondents to enter into the franchise agreements and guarantees. The probability of the relevant respondents’ inducement is to be considered in the context in which the disclosure documents were given to them, other statements or representations made to them about establishment costs and the likely profitability of the franchise businesses, the independent assumptions they made about establishment costs and profitability, the quality of the information in the disclosure documents, the primary source of the statements in the disclosure document, and the relevant respondents’ experience and knowledge compared to the evident lack of experience and knowledge of the appellant.
(4)Was misleading conduct relating to the likely costs of establishing the franchise businesses the legal cause of the loss or damage the relevant respondents suffered as a result of the failures, total loss and trading losses of the franchise businesses? Here, the question is whether the phrase ‘because of’ in s 236 of the ACL extends to all loss or damage that flowed from the relevant respondents’ decisions to enter into the franchise agreements and guarantees or only a discrete part of that loss or damage; namely, loss or damage related to the difference between the actual and misrepresented estimated establishment costs.
The issues of characterisation and causation are largely questions of fact. The grounds of appeal do not assert that the primary judge made any error of law in the identification of the applicable legal principles, but they may indirectly raise error in the application of those principles in certain respects. Nonetheless, the issues and questions in the appeal can be determined by application of the well-established principles in an appeal of this nature. That is, it is an appeal by way of rehearing where the appellate power exists for the purpose of correction of error. In deciding the proper inferences to be drawn from the facts undisputed or otherwise found, the appeal court will give respect and weight to the conclusions of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. By so doing, the appeal court corrects error. Part of the process of review reflects that the trial judge enjoys certain advantages over the appeal court and while these do not derogate from the appeal court’s duty to review, if the trial judge’s conclusions are based in whole or in part upon a conclusion about the lack of credibility of a witness, to be reversed, those findings must be shown to be contrary to ‘incontrovertible facts or uncontested testimony’ or be shown to be ‘glaringly improbable’ or ‘contrary to compelling inferences’: see, Frigger v Trenfield (No 3) [2023] FCAFC 49 at [133]-[147] (Allsop CJ, Anderson and Feutrill JJ) and the authorities there cited. In the review of the asserted errors of the primary judge, I have had regard to and applied these principles.
BACKGROUND
For ease of reference and to avoid confusion, the parties are referred to in these reasons by their names and largely in the manner in which the primary judge described them in his reasons.
Ultimate Franchising Group Pty Ltd is the ninth respondent. UFG is the Australian franchisor of the UFC Gym franchise. UFG operates under a ‘Master Territory Agreement’ with the master franchisor, UFG Franchise Operations LLC, in the United States of America. UFG is now in liquidation and took no part in the appeal.
Mazen (Maz) Hagemrad was a director of UFG from 22 June 2016 to 10 December 2018. Samer (Sam) Husseini was also a director of UFG at all relevant times. Mr Husseini is the appellant. Mr Hagemrad is the tenth respondent in the appeal. Mr Hagemrad is now a bankrupt and took no part in the appeal.
Girchow Enterprises Pty Ltd, Karim Girgis, Sherif Girgis and Paul Chau are the first, second, third and fourth respondents in the appeal and are referred to collectively as the Balcatta parties. Girchow Enterprises made a franchise agreement with UFG. Mr K Girgis was a director of Girchow Enterprises. Each of Mr K Girgis, Mr S Girgis and Mr Chau had interests in the Girchow Enterprises. They also entered into guarantees as part of the Balcatta franchise agreement. Girchow Enterprises is referred to as the Balcatta franchisee.
Activ Health Clubs Pty Ltd and Richard Kim are the fifth and sixth respondents in the appeal and are referred to collectively as the Blacktown parties. Activ Health Clubs made a franchise agreement with UFG. Mr Kim is a director and shareholder of Activ Health Clubs. Thi Ahn Tuyet Le is also a shareholder of Activ Health Clubs. Mr Kim also entered into a guarantee as part of the Blacktown franchise agreement. Activ Health Clubs is referred to as the Blacktown franchisee.
Advanced Club Management Pty Ltd and Laziz Mirdjonov are the seventh and eighth respondents in the appeal and are referred to as the Castle Hill parties. Advanced Club Management made a franchise agreement with UFG. Mr Mirdjonov is the sole director and shareholder of Advanced Club Management and he entered into a guarantee as part of the Castle Hill franchise agreement. Advanced Club Management is referred to as the Castle Hill franchisee.
The majority of the conduct of which the Balcatta, Blacktown and Castle Hill parties complained was conduct of Mr Hagemrad. The impugned conduct of Mr Husseini was less prominent. Complaint was also made about the conduct of certain employees or agents of UFG. The conduct of all the individuals was attributed to UFG under s 139B of the CC Act.
Regarding the Balcatta parties, the primary judge found that Mr Husseini had made misleading representations relating to the estimated costs of establishing a franchise business by adopting, by his silence, express misleading representations Mr Hagemrad made during a presentation given at the Hyatt Hotel in Perth on 19 January 2016 and a Skype meeting on 13 April 2016. Those findings were not challenged in the appeal. The primary judge also found that Mr Husseini made a misleading representation during a tour of the Wetherill Park gym on 10 December 2016 to the effect that the costs of Life Fitness equipment (certain gym equipment to be used in the franchise business) were included in the cost estimate in a disclosure document that had been provided to the Balcatta parties when that was not correct. Mr Husseini challenges the finding that he made that representation. The findings about misleading representations made during the presentation, meeting and tour were of significance in that the representations contributed to the overall effect of the representations about the establishment costs for a new UFC Gym franchise and the Balcatta parties’ understanding of what the likely establishment costs would be for the Balcatta franchisee.
Most significantly, the primary judge found that Mr Husseini had made misleading representations in the disclosure documents about what would be the likely range of costs to establish a new UFC Gym franchise business. The primary judge found that those representations were as to future matters and were misleading because there were not reasonable grounds for the representations. The primary judge found that the Balcatta, Blacktown and Castle Hill parties had relied on the misleading representations in the disclosure documents. Further, reliance on those representations, amongst other things, caused the Balcatta, Blacktown and Castle Hill parties to suffer loss or damage. Mr Husseini also challenges these findings in the appeal.
LEGISLATIVE FRAMEWORK
As mentioned above, Sch 2 of the CC Act contains the Australian Consumer Law or ACL.
Section 18(1) of the ACL provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Section 236(1) of the ACL provides that if a person (the claimant) suffers loss or damage because of the contravention of another person and the conduct contravened s 18(1), the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
Section 4 of the ACL provides:
4        Misleading representations with respect to future matters
(1)       If:
(a)a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b)the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3)To avoid doubt, subsection (2) does not:
(a)have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b)have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
(4)Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a)       a misleading representation; or
(b)       a representation that is misleading in a material particular; or
(c)       conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

The Australian Consumer Law applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chs 2, 3 or 4 of the ACL, which includes s 18(1), by corporations: s 131 of the CC Act. Any conduct engaged in on behalf of a body corporate by a director, employee or agent of the body corporate within the actual or apparent authority of the director, employee or agent, is taken for the purposes of the ACL to have been engaged in also by the body corporate: s 139B(2) of the CC Act.
Except to the extent that an individual is involved in a corporation’s contravention of s 18(1), and is thereby liable for a claimant’s loss or damage under s 236(1), ACL s 18(1) as a law of the Commonwealth does not apply to conduct of a ‘person’ as an individual and non-corporation. Mr Husseini was found to have contravened s 18(1) as an individual and principal wrongdoer. He was not found liable as an accessory to (i.e., a person ‘involved in’) UFG’s contravention.
Part XIAA of the CC Act facilitates the application of the ACL as a law of participating States and Territories. The applied Australian Consumer Law consists of Sch 2 of the CC Act and regulations made under s 139G: s 140B of the CC Act. Section 27 and s 28 of the Fair Trading Act 1987 (NSW) apply the ACL as a law of New South Wales (ACL (NSW)) and s 18 and s 19 of the Fair Trading Act 2010 (WA) apply the ACL as a law of Western Australia (ACL (WA)).
Although there was no focus on the issue before the primary judge or in the appeal, in point of law, it was s 236(1) of the ACL (WA) or ACL (NSW) that applied to any loss or damage the Balcatta parties suffered because of any contravention of s 18(1) of the ACL (WA) or ACL (NSW) by Mr Husseini. Section 236(1) of the ACL (NSW) applied to any loss or damage the Blacktown and Castle Hill parties suffered because of any contravention of s 18(1) of the ACL (NSW) by Mr Husseini.
While nothing in the appeal turns on the application of the ACL (WA) and ACL (NSW) to conduct of Mr Husseini, the application of the ACL as a law of a State is of significance in that it highlights that the liability of Mr Husseini must be established for causes of action of each of the Balcatta, Blacktown and Castle Hill parties against Mr Husseini as an individual and principal wrongdoer under State legislation. Further, the liability of Mr Husseini is for his individual conduct in contravention of s 18(1) and not his conduct, aggregated with the conduct of Mr Hagemrad and others, as the conduct attributed to UFG under s 139B of the CC Act for which UFG was found liable under s 18(1) of the ACL (Cth).
THE PRIMARY JUDGE’S REASONS
The cases against Mr Husseini
The nature of the cause of action pleaded against Mr Husseini as an individual is not very clear from the statement of claim. The statement of claim does not identify with any particularity, or at all, the alleged conduct of Mr Husseini, as an individual, that it is alleged was misleading or deceptive or likely to mislead or deceive. Nor does it identify what alleged loss or damage each of the Balcatta parties, Blacktown parties and Castle Hill parties suffered because of Mr Husseini’s alleged conduct. All the impugned conduct of Mr Husseini, Mr Hagemrad and UFG is pleaded in a rolled-up manner as the alleged ‘Balcatta Representations’, ‘Blacktown Representations’ and ‘Castle Hill Representations’.
Regarding the Balcatta Representations, the only conduct of Mr Husseini upon which specific reliance was pleaded concerned the Hyatt presentation in January 2016 and the Skype meeting in April 2016: second further amended statement of claim paras [9]-[12], [29]. No reliance was pleaded in respect of Mr Husseini’s conduct during the meeting at the Wetherill Park Gym in December 2016: second further amended statement of claim paras [24]-[25], [29]. In the case of the Blacktown Representations and Castle Hill Representations there is no specific conduct of Mr Husseini identified as forming part of those pleaded representations except for alleged involvement in the preparation of certain worksheets containing income forecasts: second further amended statement of claim paras [31], [33], [34], [36(e)], [36(f)], [36(g)], [37] and [39] (Blacktown); [41], [43], [44], [45], [47], [47A], [49(e)], [49(f)], [49(g)] and [50] (Castle Hill).
Regarding the disclosure documents, none of the Balcatta parties, Blacktown parties and Castle Hill parties alleged that Mr Husseini had made the representations in the disclosure documents or that they had relied on his conduct in signing those documents. In the statement of claim it is only alleged that: UFG sent the disclosure documents and draft franchise agreements containing the relevant representations to the parties; they relied on those representations to enter into the franchise agreements; the representations were representations as to future matters for which there were not reasonable grounds; the representations are taken to be misleading and, relevantly as to that aspect of the pleaded Balcatta Representations, Blacktown Representations and Castle Hill Representations, UFG engaged in conduct that was misleading or deceptive contrary to s 18 of the ACL; and the parties suffered loss or damage as a result of entering into the franchise agreements: second further amended statement of claim paras [16], [17(e)], [17(f)], [29], [35], [36(e)], [36(f)], [39], [48], [49(e)], [49(f)], [55]-[58], [61] and [62]. Consistently with the allegations in the statement of claim, insofar as it was alleged that representations contained in the disclosure documents were taken to be misleading, it is evident that Mr Husseini had not understood that any allegation was made against him in the second further amended statement of claim: defence paras [16(b)], [17(b)], [29], [35(b)], [36(b)], [39(a)], [48(b)], [49(b)], [56(a)]. That understanding was not contradicted in the reply.
Notwithstanding that it is not evident that a cause of action founded on Mr Husseini’s conduct in signing the disclosure documents was pleaded against him, no ground of appeal asserts that the primary judge was in error for that reason. Further, it appears that the parties fought the case on the basis of a list of issues identified at trial and, in those circumstances, there is no evident unfairness to Mr Husseini: see, e.g., Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 496-497. Those issues evidently included, amongst other things, whether Mr Husseini had made the representations contained in the disclosure documents pleaded in the second further amended statement of claim at paras [17(e)], [17(f)], [36(e)], [36(f)], [49(e)], [49(f)]: J [7], [223], [418], [529].
Nonetheless, the extent to which Mr Husseini’s conduct and ‘representations’ were relied upon to ground a separate cause of action against him, as distinct from conduct that was attributed to UFG under s 139B of the CC Act, is not clear from the primary judge’s reasons or his explanation of the list of issues the parties had agreed were to be determined at the trial. It is also not clear from the statement of claim. As no point has been taken in the appeal, I infer that the parties conducted the case before the primary judge on the basis that it was alleged that Mr Husseini had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in signing the disclosure documents.
The causes of action of the three claimant groups arose out of similar, but distinct, factual circumstances. For that reason they were joined in one proceeding, but, in point of detail, there were three substantive proceedings tried concurrently. As a consequence, there were a significant number of factual issues of some complexity and intricacy addressed and determined by the primary judge. Not all these matters are relevant to the appeal, but given the nature of the issues raised in the appeal, it is necessary to set out in some detail parts of the evidence and primary judge’s findings which are germane to the grounds of appeal.
Balcatta franchise
In early 2016 UFG, through Mr Hagemrad and Mr Husseini, began to promote the UFC Gym concept and franchise in Australia. Prior to UFG opening a UFC Gym in Wetherill Park in Sydney towards the end of 2016, there were no UFC Gym businesses and no UFC Gym franchise businesses operating in Australia.
Hyatt presentation and Skype meeting
After the Master Territory Agreement was signed, UFG set up a website and invited anyone who might be interested in learning about becoming a franchise owner of a UFC gym in Australia to register. Invitations were sent for a presentation to be held at the Hyatt Regency Hotel in Perth on 19 January 2016: J [69]-[70].
A presentation took place at the Hyatt on 19 January 2016. Mr Hagemrad and Mr Husseini were present. The formal part of the presentation was given by Mr Hagemrad. After the Balcatta parties showed some interest in becoming a UFC franchisee a Skype meeting was arranged and held on 13 April 2016. Mr K Girgis, Mr S Girgis, Mr Chau, Mr Hagemrad and Mr Husseini were present at that meeting.
The primary judge found that during the presentation held on 19 January 2016 Mr Hagemrad represented that a UFC Gym was likely to be able to be established for start-up costs in the range of $500,000 to $800,000 and, in context, those costs were intended and understood to include fit-out, all equipment, working capital and the franchise fee: J [235], [270(1)(a)]. The primary judge also accepted that Mr Hagemrad made, in effect, the same representation at the Skype meeting on 13 April 2016: J [237], [270(1)(b)].
The primary judge found that these were representations with respect to future matters and they were taken to be misleading because evidence to the contrary, within the meaning of s 4(2) of the ACL, was not adduced to establish that there were reasonable grounds for making the representations. Further, Mr Husseini adopted Mr Hagemrad’s representations by his conduct and his silence: J [322], [325]. The primary judge also said that, if had been necessary to do so, he would have concluded that there were not, in fact, reasonable grounds for the representations: J [323], [326].
Balcatta business plan and cashflow estimate
During June 2016 Mr Chau sent a draft business plan and cashflow estimate by email to Mr Hagemrad and Mr Husseini. A second Skype meeting was held to discuss these documents. After that meeting, Mr S Girgis sent an updated business plan and updated cashflow estimate by email to Mr Hagemrad and Mr Husseini. The cashflows included an interest expense based on an assumption of borrowing 50 per cent or $250,000 suggesting that Balcatta parties were using estimated establishment costs of $500,000 to inform their decision making at that time. The updated cashflow projected total revenue of $1,267,200 and total net trade receipts (after expenses) of $441,324 for the period November 2016 to April 2018: J [105]-[145].
The estimated cashflows were based, in part, on assumptions that annual income would be $1,152,000 and gross profit would be $1,057,536. The Balcatta parties had alleged that Mr Hagemrad and Mr Husseini were the source of those estimates and had made representations to that effect. The primary judge found that Mr Hagemrad and Mr Husseini were not the source of those assumptions. As a consequence, the Balcatta parties failed to prove that Mr Hagemrad, Mr Husseini or UFG had made any representations about the future income of the Balcatta franchise business: J [225]-[230].
First Balcatta disclosure document
On 1 July 2016 UFG’s solicitors provided the Balcatta parties’ solicitors a disclosure document dated 31 March 2016 and a draft franchise agreement (first Balcatta disclosure document). The primary judge found that Mr Hagemrad prepared and Mr Husseini signed that disclosure document. Further, that both of them made the representations contained in it and, through them, UFG made those representations: J [87], [242]. While the disclosure document was dated 31 March 2016, in effect, the primary judge found that the representations in that document were made on 1 July 2016 when it was provided to the solicitors for the Balcatta parties: J [151], [333].
The primary judge set out relevant parts of the first Balcatta disclosure document including Sch 5 (Tables 1 - 3 as well as a text box that preceded the tables and an important note that came after the tables): J [152]-[156], [159]-[162]. The parts relevant to the appeal are set out later in these reasons. For present purposes, it is sufficient to note that the document set out a range of establishment costs in Table 1 (items (a) to (f)) of Sch 5. The range of costs for item (b) (lease or purchase of equipment) was $250,000 to $350,000 and the range for item (c) (building, construction and fit-out) was $190,000 to $360,000 (approximately $300 per square metre). The primary judge characterised the statements in Table 1 as representations as to future matters and that they represented what the likely range of costs would be for lease or purchase of equipment and building, construction and fit-out to establish a UFC Gym franchise business: J [241], [270(2)(a)], [274]; J [249]-[250], [270(3)], [278].
The primary judge said that none of the evidence upon which Mr Hagemrad, UFG or Mr Husseini relied as ‘evidence to the contrary’ for the purposes of s 4(2) of the ACL provided reasonable grounds for making the representations in the first Balcatta disclosure document about the equipment costs in the range of $250,000 to $350,000: J [327]-[331]. Therefore, the representations were taken to be misleading. It also appears that he would have found that, in fact, there were not reasonable grounds for that representation: J [332]-[333]. The primary judge also concluded that evidence to the contrary was not adduced concerning the lower and upper limits of the range of $190,000 to $360,000 given for building costs and, therefore, the representation was deemed to be misleading and deceptive. Further, he would have held that the Balcatta parties had established that there were not reasonable grounds for that representation: J [334]-[335].
In the meantime, after 31 March 2016 (the date of the disclosure document) on 16 May 2016 and on 24 June 2016 Mr Hagemrad received information from Life Fitness, a potential supplier of gym equipment, that would have had an effect on the costs for leasing or purchasing equipment if Life Fitness equipment were used and whether the costs of that equipment were included in item (b) of Table 1: J [102]-[103], [146]-[150]. Life Fitness was later selected as the preferred supplier of the gym equipment. The extent to which item (b) of Table 1 included or excluded the Life Fitness equipment was a matter of controversy between the parties. The primary judge found that it was included: J [289]-[291].
Further, the primary judge concluded that, as of 1 July 2016, Mr Hagemrad must have known that the amount shown in the range of expenditure for lease or purchase of equipment in the disclosure document was grossly understated because of the information he had received from Life Fitness on 16 May and 24 June 2016. He then said that there was ‘no reason to think that Mr Husseini, who signed the First Disclosure Document, would not also have been aware that the amount was understated. He was presumably a member of “the board” with whom Mr Hagemrad says he discussed the figures’: J [333]. These findings suggest that as of 1 July 2016 Mr Hagemrad and, probably Mr Husseini, knew that the range of costs for leasing or purchasing equipment represented in the first Balcatta disclosure document were inaccurate. The significance of these findings appears to have been that they contributed to the primary judge’s conclusion that, as of 1 July 2016, there were not, in fact, reasonable grounds for the represented range of costs.
Balcatta franchise deferred
After the Balcatta parties received the first Balcatta disclosure document and draft franchise agreement there was an exchange of emails with Mr Hagemrad in July 2016. These emails reveal that the Balcatta parties viewed the range of establishment costs in Table 1 of the first Balcatta disclosure document with scepticism and they requested additional information. On 12 July 2016 Mr Hagemrad sent an email in which he made further representations about the establishment costs. After that email was sent, the Balcatta parties responded indicating that they were putting the UFC franchise project on hold for a time: J [168]-[172].
In September 2016 the Balcatta parties re-engaged with Mr Hagemrad and requested more current cost information based on UFG’s experience with establishing the Wetherill Park Gym. On 23 September 2016 Mr Hagemrad sent an email in which he, again, made further representations about establishment costs: J [173].
The primary judge found that Mr Hagemrad’s representations in his emails of 12 July 2016 and 23 September 2016 were misleading because there were not reasonable grounds for the representations made in them about the establishment costs: J [347]-[348].
Wetherill Park Gym tour
UFG established a UFC Gym at Wetherill Park in Sydney during 2016. On 10 December 2016 Mr K Girgis and Mr S Girgis participated in a tour of that gym with Mr Hagemrad and Mr Husseini. There was a discussion during that tour between Mr K Girgis and Mr Husseini in which Mr K Girgis sought clarification about whether the Life Fitness equipment costs were included in the establishment costs that had been provided to the Balcatta parties. Separately, Mr K Girgis had a discussion with Mr Hagemrad about the same topic. There was conflicting evidence given about what was said during those discussions, but the primary judge preferred the evidence of Mr K Girgis and Mr S Girgis to that of Mr Husseini and Mr Hagemrad: J [243]-[248].
In substance, the primary judge found that both Mr Husseini and Mr Hagemrad had represented that the range of equipment costs in item (b) of Table 1 of Sch 5 of the first Balcatta disclosure document included the Life Fitness equipment. The primary judge found the representations were correct insofar as they indicated that Table 1 of Sch 5 of the first Balcatta disclosure document included all equipment. But, they were misleading in the sense that, at that time (10 December 2016) the amounts could not have covered both the Life Fitness equipment and the other equipment that would be required: J [370].
Mr Hagemrad’s last representations
The primary judge found that as a result of an email from Mr S Girgis to Mr Hagemrad dated 9 January 2017 and Mr Hagemrad’s email in reply (copied to Mr Husseini) dated 10 January 2017, Mr Hagemrad represented that, in relation to the Wetherill Park Gym, the total ‘start up’ or ‘fitout’ costs (being all fit-out and all equipment) were $800,000 and those costs comprised: (1) the cost of weights, plates, and dumbbell, soft goods, UFC specific equipment including bag rack, Octagon and Everest was $200,000; and (2) the cost of fit-out, fixture, fittings, signage, branding etc was between $500,000 and $600,000. In context, that email represented that the Wetherill Park Gym costs were also likely to be the relevant costs for the Balcatta franchisee to set up a UFC franchise in premises of 1,000 square metres: J [262]-[263], [270(5)(d)].
The primary judge concluded that there was evidence to the contrary that was not adduced concerning reasonable grounds for making the representation that the cost of fit-out, fixture, fittings, signage, branding etc was between $500,000 and $600,000. Therefore, Mr Hagemrad and UFG were taken not to have had reasonable grounds for making that representation and that representation was taken to be misleading. The primary judge was satisfied that there were not, in fact, reasonable grounds for making that representation: J [371]-[373].
Second Balcatta disclosure document
On 9 February 2017 UFG’s solicitors sent the Balcatta parties’ former solicitors a letter dated 9 February 2017, a disclosure document dated 31 October 2017 (second Balcatta disclosure document) and a second draft franchise agreement. On 15 February 2017 those documents were re-sent to the Balcatta parties’ new solicitors and by Mr Hagemrad to the Balcatta parties: J [201]-[203]. As already mentioned, the franchise agreement was executed that day. The primary judge found that the second Balcatta disclosure document contained misleading representations as to future matters, but, in effect, that the Balcatta parties had not relied on that document because they had not read it before signing the franchise agreement and guarantees: J [219], [349]-[368].
Misleading conduct conclusion

The primary judge ultimately concluded:
374I am satisfied, after considering the representations in respect of establishment costs made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL.
Balcatta parties’ reliance on representations
The primary judge concluded that at the time each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and guarantees, each of them thought that the Life Fitness equipment was included in Table 1 of Sch 5. That view was held because of what is stated in the first Balcatta disclosure document and that was consistent with communications between the parties up to 1 July 2017: J [274]-[277].
The primary judge found that at least after the 10 January 2017 email, Mr K Girgis, Mr S Girgis and Mr Chau were operating on the basis that the fit-out costs were likely to be higher than represented in the first Balcatta disclosure document. At the time they each entered into the franchise agreement and guarantees ‘[they] are likely to have thought that the fit-out would be around a maximum of $600,000’. Further, ‘each was making decisions on the basis that it was likely that the total cost of all fit-out and all equipment was likely to be around $800,000 and that ‘understanding was contributed to by the terms of Table 1 of Sch 5 of the First Disclosure Document’: J [280]-[281], [309]-[313].
As to reliance on Mr Hagemrad’s emails of 16 July 2016 and 23 September 2016, the primary judge concluded that the emails were relied on as part of a broadly consistent narrative about the level of establishment costs and equipment which led the Balcatta parties to hold a view at the time they entered into the franchise agreement and guarantees that the likely upper limit of establishment costs would be around $800,000: J [284]-[285].
Due to the course of conduct that included, amongst other things, cashflows prepared and sent to Mr Hagemrad on 9 and 17 June 2016 and confirmation by Mr Hagemrad in emails on 30 January 2017 that these were in line with current expenses at the Wetherill Park Gym, Mr K Girgis, Mr S Girgis and Mr Chau did not understand from Mr Hagemrad’s email of 10 January 2017 that the total amount of $800,000 did not include the Life Fitness equipment: J [286]-[308]. The primary judge then concluded that when each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees, each acted on the basis that the total cost of fit-out would be about $600,000. Further, that each of Mr K Girgis, Mr S Girgis and Mr Chau entered into the franchise agreement and their respective guarantees because of the respondents’ conduct, which included the making of each of the representations which he had earlier concluded were conveyed: J [309]-[314]. The primary judge then said:
315In reaching these conclusions, I have taken into account the specific circumstances of each of Mr K Girgis, Mr S Girgis and Mr Chau and their differing levels of experience, referred to earlier. I have also taken into account their evidence, set out earlier, including in particular about reading the First Disclosure Document, in particular the “boxed” section in Schedule 5 and the “Important Note” at the end of that schedule.
Blacktown franchise
There were a series of meetings and email communications between Mr Hagemrad, or another representative of UFG, and Mr Kim between September 2016 and January 2017. These culminated in Mr Kim executing a franchisee certificate on 20 January 2017 and franchise agreement on behalf of the Blacktown franchisee and personal guarantee on 14 March 2017.
Cashflow document of October 2016
In an exchange of emails in October 2016, Mr Kim sent UFG a cashflow document and on 10 October 2016 Mr Jason Laurence (as representative of UFG) sent Mr Kim a revised version of that cashflow document. The primary judge found that in context, in providing the revised cashflow in the way that it did, UFG represented that gross annual revenue from membership fees for the Blacktown gym was likely to be in the order of $1,248,830, with membership growing at between 100 and 150 new members per month. It was represented that annual gross profit was likely to be in the order of $1,152,670 and that the net cash position was likely to be about $587,213 after 12 months. Also, Mr Laurence and Mr Hagemrad represented that there would be no or minimal cancellations of memberships in the first year: J [420]-[423].
The primary judge found that these were representations as to future matters and were misleading: J [443]-[455]. Further, Mr Kim relied on the representations at the time that he entered into the franchise agreement and guarantee: J [428]-[433].
Meeting on 21 October 2016
At a meeting on 21 October 2016 Mr Hagemrad represented to Mr Kim that UFC gyms would able to be established for start-up costs of approximately $600,000 for gym premises of 800 to 1,200 square metres. Mr Kim did not rely on that representation when entering into the franchise agreement or guarantee: J [419], [439].
Blacktown disclosure document provided
In late December 2016 or early January 2017, Mr Kim received a draft franchise agreement and disclosure document (Blacktown disclosure document). The Blacktown disclosure document was dated 31 October 2016 and was in the same or substantially the same form as the second Balcatta disclosure document: J [410].
The primary judge said that it was not in dispute that the disclosure document stated: J [424]-[425]:
(a)at row (b) of Table 1 of Sch 5, that the costs for the ‘lease or purchase of equipment’ would be $300,000 to $500,000; and
(b)at row (c) of Table 1 of Sch 5, that the establishment costs for ‘building, construction and fit-out costs’ would be $300,000 to $450,000.
The primary judge found that these were representations as to future matters and that they were misleading: J [443], [456]-[459], [350]-[358]. Further, that Mr Kim relied on those representations: J [434]-[438].
Regarding the representation as to the equipment that was leased or purchased the primary judge said:
357Evaluating the evidence given by Hagemrad as a whole, and in the context of the contemporaneous documents, I am not satisfied that there is “evidence to the contrary” within the meaning of s 4(2). It was not submitted that Mr Husseini – who signed the Second Disclosure Document – had adduced evidence to the contrary. His evidence was silent on the topic.
358It follows that Mr Husseini, Mr Hagemrad and UFG are “taken not to have had reasonable grounds for making the representation” (s 4(2)) and that “the representation is taken … to be misleading”: s 4(1).
359If it had been necessary, I would have held that the applicants had established that there were not reasonable grounds for making the representation about the total cost for “lease or purchase of equipment”, taking into account the matters just mentioned and the actual costs of equipment. The actual costs of equipment provide some evidence as to what was reasonably likely at the relevant time – see: Jazabas at [83]. To use Balcatta as an example, the actual costs on a GST exclusive basis for “lease or purchase of equipment”, including Life Fitness equipment, far exceeded $500,000 exclusive of GST and included at least (but arguably more than):
•Life Fitness   $ 360,000.00 (approx)
•UFC Equipment (gym)            $ 222,112.60
•UFC Equipment (juice bar)      $ 12,038.26
Total   $ 594,150.86
360In the absence of any real assistance from the parties on the issue, these amounts have been determined from a combination of Mr K Girgis’s oral evidence about the Life Fitness equipment, the invoices in Mr K Girgis’s first affidavit and Annexure 7 to the referee’s report referred to at [596] below. Mr K Girgis confirmed that the invoiced amount of $411,323 was not what was ultimately paid and the amount was around $395,000 (inclusive of GST).
361There was no reasonable basis for representing in the Second Disclosure Document that equipment could be as low as $300,000 (exclusive of GST). As Mr Hagemrad must have known, this was unlikely to have covered more than the Life Fitness equipment alone and was unlikely even to cover that. There were no reasonable grounds for suggesting that the likely upper limit was $500,000 (exclusive of GST). There may have been reasonable grounds for this amount being within the range of likely costs, but not for representing that it was the likely upper limit (see cl 14.5 of the Second Disclosure Document). In reaching these conclusions, I have sought to take hindsight bias into account – see: Jazabas at [83].
Regarding the representation as to establishment costs for building, construction and fit-out, the primary judge said:
364In my view, the evidence given did not amount to “evidence to the contrary” within s 4(2). All that was adduced was a series of quotations and invoices to which Mr Hagemrad said he had regard in some unidentified way at the time of making the representation. I should not be taken as accepting that Mr Hagemrad in fact had regard to the documents when making the representation. But, even accepting he did, the evidence does not permit any reliable conclusion as the facts and circumstances Mr Hagemrad actually relied on making the representation.
365It follows that Mr Husseini, Mr Hagemrad and UFG are “taken not to have had reasonable grounds for making the representation” (s 4(2)) and that “the representation is taken … to be misleading”: s 4(1).
366If it had been necessary, I would have held that the Balcatta, Blacktown and Castle Hill applicants had established that there were not reasonable grounds for making the representation, taking into account the matters just mentioned and the actual costs of fit-out. On any reasonable view of what comprised fit-out – and noting for the Balcatta applicants they had been told that “fit-out” including such matters as flooring, AV, fittings, signage, branding and so on – the fit-out for each of the franchises significantly exceeded what had been represented to the franchisees. Mr Hagemrad managed all aspects of the fit-out for the franchisees: T448.12-27 (Mr Laurence); T489-490 (Mr Hagemrad). …
Misleading conduct concerning the Blacktown parties
The primary judge ultimately concluded:
460I am satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL.
Blacktown parties’ reliance on the representations
In terms of the primary judge’s overall assessment of reliance, he said:
427The question whether Mr Kim relied on the representations turns on all of the facts assessed in context. A part of the context is Mr Kim’s experience in business, the documents he read before entering into the franchise agreement (which included the disclosure document, the franchise agreement and the franchise certificate) and the facts that he received advice from an accountant and business adviser. I have taken these matters into account.
The primary judge found that Mr Kim relied on the revised cashflow at the time he entered into the franchise agreement and guarantee to forecast likely income: J [433]. He also found that Mr Kim relied upon Sch 5 Table 1 items (b) and (c) of the Blacktown disclosure document as accurately reflecting the likely upper and lower limits of the total cost of equipment and the total cost of fit-out: J [437]. The primary judge found that Mr Kim had not relied on representations as to establishment costs that pre-dated the Blacktown disclosure document: J [439].
Castle Hill franchise
There were a series of meetings and communications between Mr Hagemrad and other representatives of UFG and Mr Mirdjonov. These took place between June 2017 and August 2017 and culminated with Mr Mirdjonov executing a franchisee certificate on 15 September 2017 and franchise agreement, on behalf of the Castle Hill franchisee, and a personal guarantee in September 2017.
Meeting on 12 June 2017
On 12 June 2017 there was a meeting between Mr Hagemrad and Mr Price, as representatives of UFG, and Mr Mirdjonov. At that meeting Mr Hagemrad represented to Mr Mirdjonov that: J [461], [531]-[534], [536]:
(a)the franchisor (UFG) had a proven business model that works in Australia;
(b)the franchise breakeven point was approximately 600 to 700 members; and
(c)existing UFC gyms that had opened in Australia were profitable.
The primary judge found that these representations were misleading: J [575]-[580]. He also found that Mr Mirdjonov had relied upon them to enter into the franchise agreement and guarantee: J [565].
At the same meeting, Mr Price (and UFG) represented at that meeting that franchises for UFC gyms would be able to be established for start-up costs of approximately $1,000,000 to $1,200,000 depending on the site: J [537]. The primary judge found that there were not reasonable grounds for making the representation (and, therefore, it was misleading). However, he found that Mr Mirdjonov had relied upon it to a minor degree and its causal contribution was minor: J [569], [589].
On 12 June 2017 Mr Price sent Mr Mirdjonov an email attaching templates for a business plan and a 12-month cashflow. On 13 June 2017 Mr Laurence sent Mr Mirdjonov an email attaching a document that was said would help him in building his business plan. On 2 July 2017 Mr Mirdjonov sent an email to Mr Laurence posing a number of questions to assist him completing his business plan and Mr Laurence responded the same day. On 7 July 2017 Mr Mirdjonov sent Mr Laurence a financial model and business plan and requested Mr Laurence to review it and let Mr Mirdjonov know what Mr Laurence thought of it. Later that day Mr Mirdjonov sent an updated financial model. On 10 July 2017 Mr Mirdjonov sent Mr Price an email attaching what was described as a final draft business plan and profit and loss forecast: J [475]-[503].
The primary judge found as a result of these exchanges of email correspondence and other conduct that Mr Hagemrad (and UFG) made the following representations to Mr Mirdjonov: J [540]-[547].
(a)Mr Hagemrad (and UFG) had represented that it was likely that gross income for the Castle Hill gym would grow from $79,825 on month one of opening to $120,736 by month 10.
(b)Mr Hagemrad (and UFG) represented that it was likely that forecast total revenue for the first year would be $935,588 and that it would be $1,212,579 12 months after opening.
(c)Mr Hagemrad (and UFG) represented that it was likely that membership would grow to 1272 members within 10 months of opening, growing by between 71 and 150 new members monthly, taking into account cancellations.
(d)Membership was likely to continue to grow to about 1690 members by the end of 22 months.
(e)Income of $1.83 million would be generated in the second year.
The primary judge found that these representations were misleading: J [580]-[588].
Meeting on 20 July 2017
On 20 July 2017 there was a further meeting between Mr Hagemrad and Mr Mirdjonov. After that meeting Mr Mirdjonov sent an email to Mr Hagemrad and Mr Price attaching an updated business plan and profit and loss forecast: J [504]-[508]. The primary judge made no relevant findings about representations flowing from the meeting and email: J [548]-[551]. However, he found that these contributed to Mr Mirdjonov’s reliance on the representations concerning income, membership and performance: J [566]-[568].
Castle Hill disclosure document provided
On 23 August 2017 Mr Mirdjonov received from UFG a draft franchise agreement and the Castle Hill disclosure document for a prospective franchisee. The Castle Hill disclosure document was dated 27 April 2017 and was signed by Mr Husseini: J [515]-[516]. The primary judge found that: J [552]-[553]:
(a)by para (b) of Table 1 in Sch 5 of the Castle Hill disclosure document, Mr Husseini, Mr Hagemrad and UFG represented that the cost for the ‘lease or purchase of equipment’ was likely to be between $350,000 and $500,000; and
(b)by para (c) of Table 1 in Sch 5 of the Castle Hill disclosure document, Mr Husseini, Mr Hagemrad and UFG represented that the amount for ‘building, construction and fit-out costs’ was likely to be between $400,000 and $650,000.
The primary judge found that these representations were misleading for the same reasons that he concluded that the second Balcatta disclosure document was misleading: J [590]-[593].
Misleading conduct concerning the Castle Hill parties
The primary judge ultimately concluded:
594I am satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL.
Reliance on Castle Hill representations
In terms of the primary judge’s overall assessment of reliance, the primary judge said:
555As with the [other] individuals, the question whether Mr Mirdjonov relied on the representations in entering into the franchise agreement and guarantee turns on all of the facts assessed in context, including his experience, the documents he read before entering into the franchise agreement – which included the disclosure document, the franchise agreement and the franchise certificate – and the advice he received. I have taken these matters into account in assessing reliance.
The primary judge found that in agreeing to enter into the franchise agreement and in guaranteeing the obligation of the franchisee, Mr Mirdjonov relied on the income, membership and performance representations that were conveyed through the financial model he prepared and Mr Hagemrad endorsed: J [565]. His Honour found that Mr Mirdjonov had not relied upon the representation concerning the cost for the lease or purchase of equipment: J [570]. However, his Honour found that Mr Mirdjonov had relied on Sch 5 Table 1 item (c) (building, construction and fit-out) that represented that establishment costs for building, construction and fit-out were likely to be between $400,000 to $650,000: J [571].
Observations about evidence and findings of reliance
The primary judge observed that the reliability of the evidence-in-chief of Mr Chau, Mr K Girgis and Mr S Girgis to the effect that they had relied on representations in the first Balcatta disclosure document was called into question and, in substance, was unreliable because their evidence was more-or-less in exactly the same terms as each other and as the evidence-in-chief of Mr Kim and Mr Mirdjonov: J [61]-[62]. The primary judge observed that it exposed the witnesses to an attack on their credibility ‘if what had occurred was not so obvious’: J [63]. What was obvious was that the affidavit evidence had been prepared by legal representatives in a formulaic manner. The primary judge, in effect, treated the statements in the affidavits with caution and placed more weight on the evidence given in cross-examination and contemporaneous documents: J [64]-[68].
Regarding the primary judge’s findings and conclusions, including the inferences drawn, about reliance, when dealing with the disclosure documents, the primary judge observed that in reaching his conclusions about reliance he had taken into account the ‘boxed’ section and ‘Important Note’ in Sch 5 of the disclosure documents: J [315], [427] (implicitly), [555] (implicitly). However, the reasons do not contain any detailed examination of the manner in which the qualifying text in Sch 5 was taken into account when reaching his conclusions that the claimant parties relied on the representations about the establishment costs in Table 1 of Sch 5. Otherwise, having regard to the lack of reliability of their evidence-in-chief, the reasons, as a whole, indicate that the primary judge’s findings and conclusions about reliance, to which reference has been made earlier, were based on evidence given in cross-examination, contemporaneous documents and inference drawn from established facts. Therefore, generally, in an appeal by way of rehearing, this Court is in as good a position as the primary judge to draw such inferences about reliance.
Damages

After concluding that the Balcatta, Blacktown and Castle Hill parties had relied upon misleading representations to enter into the franchise agreements and guarantees and that Mr Hagemrad, Mr Husseini and UFG had engaged in misleading conduct in contravention of s 18 of the ACL, the primary judge the dealt with loss, damage and other relief.
Insofar as loss or damage was concerned, the claimant parties had run their cases on the basis that, if the misleading or deceptive conduct had not occurred, they would not have executed the franchise agreements or guarantees and that their loss or damage was:
(a)the sum of the costs incurred setting up the franchises, the borrowing costs incurred and net operating losses incurred in running the franchises; less
(b)the residual value of the franchise businesses: J [597].
The primary judge, in effect, accepted that was the appropriate way to calculate the claimant parties’ loss or damage. The amounts in (a) and (b) were set out in reports of a referee which the primary judge adopted and used as the basis for determining the loss or damage of the claimant parties. Further, for the purpose of determining the residual value of the businesses, the primary judge considered that 31 December 2022 was the appropriate date at which to value the business: J [598]-[619]. The primary judge then assessed the respective claimant parties’ loss or damage by reference to and adopting the conclusions in the referee’s reports except as to the net operating losses with respect to the Castle Hill franchise. As to the net operating losses of the Castle Hill franchise, that was referred to the referee for further assessment: J [635]-[660].
Underpinning the primary judge’s assessment of loss or damage was a finding that upon entering into the franchise agreements and guarantees, the claimant parties ‘were locked into arrangements with the franchisors and into an endeavour to operate a business concept which had just been introduced into the Australian market’. Further, that the operating losses incurred running the business were incurred ‘because of’ the conduct of Mr Hagemrad, Mr Husseini and UFG. There was no loss separate to that occasioned because of the conduct in contravention of s 18(1) of the ACL: J [618]. The primary judge found that the claimant parties had suffered loss or damage because they had expended money on setting up businesses that had no value as a going concern. The businesses had no value because they did not and were unlikely to ever generate a profit: J [610]-[611].
Put another way, the primary judge accepted the claimant parties’ approach to assessment of their respective loss or damage because he accepted, in effect, that the failure of the franchise businesses (the negligible value of them) was ‘because of’ the misleading or deceptive conduct of Mr Hagemrad, Mr Husseini and UFG. The negligible value of the franchise businesses meant that the claimant parties, in substance, received no value for the costs incurred establishing the businesses, were not able to recover borrowing costs on those establishment costs and made operating losses running the franchise businesses.
GROUNDS OF APPEAL
In the second further amended notice of appeal there are nine grounds of appeal concerning the Balcatta franchise, six concerning the Blacktown franchise and seven concerning the Castle Hill franchise.
Damages
In the case of the Balcatta franchise, Blacktown franchise, and Castle Hill franchise, two grounds concerned damages which, in effect, raise the same points and are common.
In the end, the ground advanced was to the effect that the primary judge was in error in assessing the claimant parties’ loss or damage by reference to the value of the franchise businesses as of 31 December 2022. In substance, Mr Husseini contends that his impugned conduct relates to the estimated establishment costs of the franchise businesses. The claimant parties failed to establish that they suffered loss or damage because of any prejudice resulting from them being misled about the establishment costs. The claimant parties suffered loss or damage because the franchise businesses were not profitable. The profitability of the businesses was unrelated to the establishment costs.
As the grounds concerning loss or damage are essentially common, it is convenient to deal with those grounds separately from the other grounds. Further, for the reasons given later, it is not necessary to deal with these grounds of appeal at all because I have concluded that Mr Husseini should succeed on the grounds of appeal concerning characterisation of and reliance on his individual conduct.
Balcatta franchise
The remaining seven grounds concerning the Balcatta franchise fall into four groups of issues and Mr Husseini’s grounds and contentions may be summarised as follows.
Balcatta Issue 1: Grounds A.3.f and A.4, A.5 and A.6 concern the findings that the primary judge made about Mr Husseini’s conduct during the Wetherill Park Gym tour on 10 December 2016. Mr Husseini contends that the primary judge was in error for concluding that the fit-out costs in the disclosure document did not include the Life Fitness equipment. The primary judge should have found that Mr Husseini informed a representative of the Balcatta parties that the estimate for fit-out costs did not include the Life Fitness equipment, alternatively, he should have found that Mr Husseini’s statement was not misleading because it was qualified with a statement to the effect that the Balcatta parties should check with Mr Hagemrad.
Balcatta Issue 2: Grounds A.1 to A.3, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the first Balcatta disclosure document. Mr Husseini contends that:
(a)the first Balcatta disclosure document contained qualifications and disclaimers (the Sch 5 text box and important note): A.3.a; and
(b)in the context of those qualifications and disclaimers and:
(i)the representations Mr Hagemrad made in his emails of 16 July 2016 and January 2017 about estimated establishment costs: A.3.b, A.3.g, A.3.h;
(ii)the finding the primary judge should have made about Mr Husseini’s statements on 10 December 2016: A.3.f;
(iii)the contents of the second Balcatta disclosure document (which contained significantly higher cost estimates): A.3.k; and
(iv)that Mr Husseini made no representations concerning establishment costs after 1 July 2016: A.3.j,
Mr Husseini’s conduct was not misleading or deceptive or likely to mislead or deceive.
Balcatta Issue 3: Grounds A.1 to A.3 also, in substance, assert that the primary judge was in error in concluding that the Balcatta parties relied on the representations made on 19 January and 13 April 2016 and the representations about establishment costs in the first Balcatta disclosure document. Mr Husseini contends that the primary judge ought to have disregarded the Balcatta parties’ evidence-in-chief about reliance because it was not credible as the statements of all claimant parties were more-or-less the same and were ‘cut and pasted’ from the written evidence of one of the other parties. Mr Husseini contends, in substance, that it was not open to the primary judge to infer from the evidence and other findings that he had made that the Balcatta parties had relied on the representations made on 19 January and 13 April 2016 or in the first Balcatta disclosure document.
Mr Husseini contends it was not so open:
(a)for the same reasons that he contends that the representations in the first Balcatta disclosure document, in context, was not objectively misleading conduct: A.3.a, A.3.b, A.3.f, A.3.g, A.3.h, A.3.j and A.3.k;
(b)because the Balcatta parties did not believe that the cost estimates were accurate and undertook their own due diligence between July and September 2016: A.3.b, A.3.c and A.3.g;
(c)because the results of the Balcatta parties’ due diligence were not disclosed in evidence and it should be inferred that they failed to do so because they feared to do so: A.3.d;
(d)because, at the time of execution of the Balcatta franchise agreement and guarantees, the Balcatta parties:
(i)were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): A.3.e;
(ii)had been given a higher estimate of establishment costs than those stated in the first disclosure document by Mr Hagemrad: A.3.g and A.3.h;
(iii)had been provided with the second Balcatta disclosure document that contained higher estimates: A.3.k; and
(iv)would not have entered into the franchise agreement if they had known of the cost estimate in the second disclosure document: A.3.l; and
(v)knew that the estimated figure for establishment costs was greater than the estimate in the first disclosure document: A.3.i.
Balcatta Issue 4: Grounds A.3.n and A.3A contend, in substance, for the same reasons that it was not open to infer reliance, the primary judge failed to give reasons or adequate reasons for his conclusion that the Balcatta parties had relied upon the misleading representations made on 19 January and 13 April 2016 and in the first Balcatta disclosure documents relating to the establishment costs of a franchise business. Mr Husseini contends that the reference to these matters at J [314] is inadequate to explain ‘how’ the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document.
Blacktown franchise
The four grounds other than damages for the Blacktown parties fall into three groups of issues that are similar to the last three Balcatta issues.
Blacktown Issue 1: Grounds B.1 to B.2, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the second Balcatta disclosure document which is also the Blacktown disclosure document. As with the Balcatta parties, Mr Husseini contends that the Blacktown disclosure document contained disclaimers and qualifications and, in that context, his conduct was not misleading or deceptive or likely to mislead or deceive: B.2.a.
Blacktown Issue 2: Grounds B.1 to B.3, in substance, assert that the primary judge was in error in concluding that the Blacktown parties relied on representations in the Blacktown disclosure document relating to the establishment costs of a franchise business. For the same reasons as for the Balcatta parties, Mr Husseini contends the primary judge should have disregarded the Blacktown parties’ evidence-in-chief about reliance: B.3.a and B.3.b. Further, it was not open to the primary judge to infer reliance based on the evidence and other findings. It was not so open because:
(a)at the time of execution of the Balcatta franchise agreement and guarantees, the Balcatta parties were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): B.2.b;
(b)the Blacktown parties had not demonstrated that the nature of the costs actually incurred at the location actually used in establishing the Blacktown franchise business were consistent with the assumed nature of the estimated costs in the disclosure document: B.2.e;
(c)the Blacktown parties obtained accounting and business advice before entering into the franchise agreement and guarantee upon which they had relied: B.2.c;
(d)the Blacktown parties failed to give evidence of the accounting and business advice they obtained and the primary judge should have inferred that failure was because they feared to do so: B.3.c; and
(e)the Blacktown parties admitted they had relied on information provided to them by Mr Hagemrad and Mr Laurence: B.2.d.
Blacktown Issue 3: Ground 3A asserts, in substance, for the same reasons that the primary judge was in error for concluding that there was reliance, he failed to give adequate reasons for concluding that the Blacktown parties relied on the representations contained in the Blacktown disclosure document relating to the establishment costs of a franchise business. Mr Husseini contends that the reference to these matters at J [427] is inadequate to explain ‘how’ the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document.
Castle Hill franchise
The issues raised in the five grounds other than damages for the Castle Hill parties fall into four groups.
Castle Hill Issue 1: Grounds C.1 to C.3, in substance, assert that the primary judge was in error in concluding that Mr Husseini engaged in conduct in contravention of s 18(1) of the ACL by signing the Castle Hill disclosure document. Mr Husseini contends that, in context, the representations in the disclosure document were not misleading. The context was that, in July 2017, before the Castle Hill parties were provided with the disclosure document, UFG informed the Castle Hill parties that the total establishment costs would exceed $1.5 million which was significantly higher than the estimates in the disclosure document: C.2.a.i.
Castle Hill Issue 2: Grounds C.1 to C.3, in substance, also assert that the primary judge was in error in concluding that the Castle Hill parties relied on the representations in the disclosure document relating to establishment costs and he should have found that the Castle Hill parties could not reasonably have relied on those representations based on the context and evidence. That context and evidence was:
(a)UFG had informed the Castle Hill parties that the total establishment costs would exceed $1.5 million: C.2.a.i;
(b)the Castle Hill parties had estimated that the establishment costs would be in excess of $1.5 million: C.2.a.ii;
(c)the Castle Hill parties understood that the actual establishment costs could be around $100,000 greater than the $1.2 million represented in the disclosure document: C.2.a.iii;
(d)the actual establishment costs the Castle Hill parties incurred was less than $1.5 million and close to the $1.2 million represented in the disclosure document: C.2.b and C.2.c;
(e)the primary judge found that the Castle Hill parties had not relied on the equipment costs represented in the disclosure document because:
(i)they knew that the equipment costs represented in the disclosure document were less than the estimates provided in July 2017: C.3.a.i; and
(ii)they relied on the detailed financial model in relation to the cost of equipment rather than the representations in the disclosure document: C.3.a.ii;
(f)that if the Castle Hill parties had relied on the fit-out costs represented in the disclosure document, the primary judge made no finding as to the actual fit-out costs and no finding that the actual fit-out costs exceeded the upper range of the amount of $650,000 represented in the disclosure document: C.3.b and C.3.c.
Castle Hill Issue 3: Grounds 1 and 4, in substance, assert that the primary judge was in error in concluding that the Blacktown parties relied on representations in the Blacktown disclosure document relating to the establishment costs of a franchise business. For the same reasons as for the Balcatta parties, Mr Husseini contends the primary judge should have disregarded the Castle Hill parties’ evidence-in-chief about reliance: C.4.e and C.4.f. Further, it was not open to the primary judge to infer that the Castle Hill parties relied on the representations in the disclosure document relating to the fit-out establishment costs based on the evidence and other findings. It was not so open because:
(a)the Castle Hill disclosure document contained the same disclaimers and qualifications as for the other disclosure documents: C.4.a;
(b)at the time of execution of the Balcatta franchise agreement and guarantees, the Castle Hill parties were not aware of the location at which the franchise business would be established (and therefore the likely establishment costs of that business): C.4.b;
(c)the Castle Hill parties relied on the information provided to them by UFG in July 2017: C.4.d;
(d)the Castle Hill parties knew that the fit-out costs represented in the disclosure document was not a guarantee: C.4.c; and
(e)the Castle Hill parties wrongly understood that the disclosure document represented ‘actual’ historical amounts rather than estimates where actual costs would depend on the specific location of the franchise business: C.4.g.
Castle Hill Issue 4: Grounds C.4.f and C.4A contend, in substance, for the same reasons that it was not open to infer reliance or to conclude that reliance was reasonable, the primary judge failed to give reasons or adequate reasons for his conclusion that the Castle Hill parties had relied upon the misleading representations made in the disclosure document. Mr Husseini contends that the reference to these matters at J [555] is inadequate to explain ‘how’ the primary judge took the disclaimers and qualifications into account in reaching the conclusion that there was reliance on the misrepresentations in the disclosure document.
APPLICABLE LEGAL PRINCIPLES
The issues raised in the grounds of appeal primarily concern characterisation, reliance, causation and damage. Although none of the grounds except those relating to damages assert that the primary judge made an error of law in identifying the applicable principles and there was no real dispute between the parties about those principles in the appeal, it is helpful to set out and summarise those principles as they provide the framework within which to consider the asserted errors of the primary judge.
Misleading conduct
Characterisation
In Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195 Keifel CJ, Gageler, Gordon, Edelman and Gleeson JJ summarised the applicable principles for determining a breach of s 18 of the ACL as follows:
[80]The principles are well established. Determining whether a person has breached s 18 of the ACL involves four steps: first, identifying with precision the “conduct” said to contravene s 18; second, considering whether the identified conduct was conduct “in trade or commerce”; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was “misleading or deceptive or … likely to mislead or deceive” [See Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; 294 ALR 404; 99 IPR 197; [2013] HCA 1 at [89]. See also Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904 at [14]–[15]; Reckitt Benckiser (Australia) Pty Ltd v Procter & Gamble Australia Pty Ltd [2015] FCA 753 at [35]].
[81]The first step requires asking: “what is the alleged conduct?” and “does the evidence establish that the person engaged in the conduct?” [Compare Google at [89]]. The third step considers what meaning that conduct conveyed to its intended audience [Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; 291 ALR 399; 91 ACSR 128; [2012] HCA 39 at [26]]. As in this case, where the pleaded conduct is said to amount to a representation, it is necessary to determine whether the alleged representation is established by the evidence [Telstra at [14], citing Campomar [Sociedad Limitada v Nike International Ltd (2002) 202 CLR 45] at [105], National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420; 49 ACSR 369; ATPR ¶42-000 (National Exchange) at [18] and Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106; [2006] FCAFC 22 at [37]]. The fourth step is to ask whether the conduct in light of that meaning meets the statutory description of “misleading or deceptive or … likely to mislead or deceive”; that is, whether it has the tendency to lead into error [Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 186; 96 ACSR 475; [2013] HCA 54 at [39]]. Each of those steps involves “quintessential question[s] of fact” [Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459; [2004] FCA 987 at [49]. See also Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; 212 ALR 357; [2004] HCA 60 at [109]].
[82]The third and fourth steps require the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons [See Campbell v Backoffıce Investments Pty Ltd (2009) 238 CLR 304; 257 ALR 610; 73 ACSR 1; [2009] HCA 25 at [24]–[25]. See also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199; 42 ALR 1 at 7; 1A IPR 684 at 689 (Parkdale Custom Built Furniture); Campomar at [102]–[103]]. That context includes the immediate context — relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation — and the broader context of the relevant surrounding facts and circumstances [Parkdale Custom Built Furniture at CLR 199; ALR 7; IPR 689; Butcher at [39], [109]; Campbell at [25]–[26], [102]; TPG Internet at [51]–[52]]. It has been said that “[m]uch more often than not, the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character” [Google at [92]]. That said, the description of the conduct alleged and identified at the first step should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive.
Attribution, disclaimers and other context

The primary judge concluded:
438Mr Kim did not see the upper limit as providing a guarantee, and acknowledged that there was a risk that the upper limit might be exceeded, but he nevertheless considered that it represented the likely upper limit. Mr Kim’s assessment of the risk of the upper limit being exceeded was influenced by the course of his dealings with UFG, in particular with Mr Hagemrad and Mr Laurence. Further, Mr Kim’s assessment of the consequences if the upper limit in respect of start-up costs were exceeded would necessarily have been affected by the income representations, including in particular net operating cash receipts of $587,213 indicated in the Revised Cash Flow.
The primary judge made no specific finding and reached no specific conclusion that the Blacktown parties relied on Mr Husseini’s conduct as an individual. There is also no specific finding or conclusion that the Blacktown parties relied on the misleading representation about establishment costs to enter into the franchise agreement and guarantee. The express finding and conclusion of reliance in that respect is limited to reliance on the Blacktown revised cash flow estimate: J [433]. Nonetheless, it is implicit from the primary judge’s conclusion that Mr Husseini engaged in misleading conduct in contravention of s 18 of the ACL and his award of damages that he also considered the Blacktown parties had relied on Mr Husseini’s misleading conduct in a way that contributed to them entering into the franchise agreement and guarantee.
As with the Balcatta parties, the primary judge’s findings about reliance were not based on Mr Kim’s evidence-in-chief because that was unreliable. The findings are based on the evidence he gave during his cross-examination and the documents tendered in evidence. Mr Husseini contends that the primary judge’s conclusions were wrong on the facts found or uncontested or otherwise, his reasons concerning reliance were inadequate. The Blacktown parties’ response was substantially the same as the Balcatta parties’ response to those contentions. Again, due to the nature of the asserted error and the primary judge’s conclusions, it is open to this Court in an appeal by way of rehearing to reach a different conclusion to the primary judge.
In my view, the primary judge’s findings and conclusions about the Blacktown parties’ reliance on the misleading establishment costs representation were not sufficient to support a conclusion that the Blacktown parties entered into the franchise agreement and guarantee because of misleading representations Mr Husseini made as an individual. Therefore, a critical link between the loss or damage the primary judge found that the Blacktown parties had suffered and the misleading representations of Mr Husseini was not established in the findings the primary judge made on the evidence. For the reasons which follow, in my view, the correct inference to be drawn from the facts as found or undisputed is that the Blacktown parties were not induced by any misleading conduct of Mr Husseini to enter into the franchise agreement and guarantee. Therefore, giving due respect and weight to the conclusions of the primary judge, I have come to a different conclusion.
As with the Balcatta parties, Mr Kim’s direct evidence about his reliance on the representations about establishment costs in the disclosure document was unreliable and, otherwise, conclusionary. Again, the misrepresentations were not of a character from which reliance or inducement can be inferred from the fact of entry into the Blacktown franchise and guarantee. However, for the reasons already given, it would have been reasonable for the Blacktown parties to rely on the Blacktown disclosure document to form their own assessment about the likely establishment costs that the Blacktown franchise would incur. In terms of assessing the likely establishment costs, the misleading representation was capable of leading to an error in that assessment because the risk that the actual establishment costs would exceed the upper limit of the range was greater than the disclosure document led a prospective franchisee to believe.
The findings of the primary judge reveal an appreciation that, as a matter of common experience and knowledge, estimated future income, estimated establishment costs and assessment of risk of the kind referred to earlier in these reasons, informed the Blacktown parties’ decision to enter into the franchise agreement and guarantee. The misleading nature of the representations in the Blacktown disclosure document meant that the Blacktown parties were unaware of the full extent of the risk that the upper limit of the range of establishment costs might be exceeded. Mr Kim’s assessment of the consequences of exceeding the upper limit would necessarily have been affected by the income representations because, assuming the income met expectations, Mr Kim would have had a reasonable margin for error in the estimated establishment costs. However, for similar reasons to those given in relation to the Balcatta parties, it is improbable that the Blacktown parties relied on Mr Husseini’s misleading representations.
None of the representations about establishment costs in the Blacktown disclosure document are directly attributed to Mr Husseini and he does not expressly adopt them in the document. The disclosure document indicates that Mr Husseini has no relevant experience or knowledge of operating a franchise business or UFC Gym business. The single existing business is identified as that of UFG, as franchisor. Therefore, the evident source of information about establishment costs is UFG.
Mr Kim gave evidence that he had made an assumption that as long as his premises were of a similar size and condition as the Wetherill Park Gym, the Blacktown franchisee’s costs would be within the range represented in the disclosure document. That assumption was contrary to the express disclaimer and qualifications in the disclosure document that warned that costs will vary depending on location and suppliers. There was no evidence that Mr Kim had identified a property, at the time the franchise agreement and guarantee was entered into, that fell within the assumed parameters. Thus, Mr Kim relied on his subjective interpretation of the disclosure document which was not consistent with the objective representations in that document as disclaimed and qualified. Additionally, information about the size and condition of the Wetherill Park Gym, that is the extraneous assumptions, was not contained in the disclosure document. Presumably that information was either obtained from Mr Hagemrad or from Mr Kim’s observations as he had a meeting with Mr Hagemrad at the Wetherill Park Gym. Therefore, the parameters of Mr Kim’s assumptions were not derived from information contained in the disclosure document or from Mr Husseini. These are firm indications that Mr Kim did not rely on the misleading representations (as qualified) in the Blacktown disclosure document.
It is also significant that the primary judge found that Mr Kim had relied on the Blacktown revised cashflow estimates at the time he entered into the franchise agreement and guarantee: J [433]. Mr Husseini was not involved in making the misleading representations in that document. The primary judge also recognised that the cashflow estimates would have affected Mr Kim’s assessment about the risk of establishment costs exceeding the upper limit of the range represented in the Blacktown disclosure document: J [438].
The effect of the primary judge’s findings is that Mr Kim relied on the misleading representation in the disclosure document to inform his own assessment and judgment of what establishment costs the Blacktown franchisee would incur if it entered into the franchise agreement. That assessment and judgment was based, in part, on an assumption that, by selecting an appropriate site, the establishment costs would fall within the range represented in the disclosure document. Mr Kim knew and understood that there was a risk that establishment costs would exceed the upper limit of the range represented in the disclosure document for reasons that included the site at which the franchise business was established. Mr Kim was induced to enter into the franchise agreement and guarantee based on misleading representations as to the likely future income of the franchise business. Those misleading representations influenced Mr Kim’s assessment of the risk that the upper limit of the range of establishment costs would be exceeded. That is, the misleading representations about future income of the franchise business had the effect of increasing Mr Kim’s appetite to accept the risk that establishment costs may exceed the upper range represented in the disclosure document. Put another way, while the representations about establishment costs may have had an influence on Mr Kim’s decision-making process, unlike the misleading representations about future income, the establishment costs representations were no real inducement for Mr Kim to enter into the franchise agreement or guarantee.
Mr Kim gave the following evidence during his cross-examination:
The reason, Mr Kim, that you did not notify UFG that you were relying on any cash flow or revenue representations made by it was because when you entered into the franchise agreement, you were not relying on any cash flow or revenue representations made by UFG. That’s the case, isn’t it?---I disagree with that.
You had made your own assessment of the likely financial performance of the business which you were planning to set up, and you relied on your assessment in relation to that. That’s the case, isn’t it?---I made my assessment on the information provided to me by Maz and Jason.
And you also obtained accounting and business advice as you indicated in the franchisee certificate which you signed on 20 January 2017, correct?---Yes.
And it was that accounting and business advice which you were relying on in deciding to enter into the franchise agreement. That’s the case, isn’t it?---No.
Well, you’re not saying that you did not rely at all on the accounting and business advice which you refer to in the franchising certificate. Is that correct?---No, I’m not saying that.
As with the Balcatta parties, Mr Husseini contends, relying on Ferrcom, that the primary judge should have inferred that Mr Kim feared giving evidence-in-chief (or in re-examination) about the substance of the accounting and business advice he received because it would expose facts unfavourable to the Blacktown parties. Here, Mr Husseini is on somewhat firmer ground because Mr Kim was cross-examined about his reliance on the accounting and business advice. Mr Kim’s evidence in the quoted passage is ambiguous about the extent to which he relied on the accounting and business advice. The upshot of it is that he accepts that he relied on it to an extent, but not as the inducement to enter into the franchise agreement. But, again, the content of the accounting and business advice is a matter of speculation. Mr Husseini has not identified any evidence or finding of the primary judge from which an inference could be drawn that Mr Kim was induced to enter into the transaction by some information, advice or opinion expressed by any accounting and business advice he received about the establishment costs or financial viability of the Blacktown franchise. The primary judge summarised the evidence of Mr Kim and added: ‘There was nothing in the contemporaneous documents to suggest significant reliance on that advice [of the accountant and business adviser] or to give content to it’: J [432]. Mr Husseini has not demonstrated that the primary judge made any error in that assessment of the evidence or in failing to draw any particular inference of fact against the Blacktown parties because they failed to give evidence upon the topic of that inference.
Further, the topic of this passage of cross-examination is the likely financial performance of the franchise business. It is not establishment costs. That is of significance because Mr Kim was asked if he had relied on his assessment in relation to financial performance and he responded that he made his assessment ‘on the information provided to him by [Mr Hagemrad] and [Mr Laurence]’. That is, the information they provided to him about the future financial performance of the franchise business. Put another way, the direct evidence of Mr Kim indicates that he relied on the projected financial performance and not establishment costs.
Having regard to the evidence referred to earlier and the primary judge’s findings, it is highly improbable that Mr Kim was induced to enter into the franchise agreement and guarantee by Mr Husseini’s misleading representation to the effect that there were reasonable grounds for representing that range of establishment costs encountered by new franchisees were as set out in Sch 5 Table 1 item (b) and (c) of the Blacktown disclosure document. To the extent that Mr Kim relied on that representation at all, it is more probable that he relied on the representations of UFG as the source or origin of the information.
I would allow grounds B.1.b and B.2.ii of the notice of appeal. It is not necessary to determine ground B.3A. For the reasons already given, irrespective of the adequacy or otherwise of the primary judge’s explanation, the findings made were not sufficient to support the conclusion of reliance and I have concluded that on the facts found or undisputed, the Blacktown parties did not rely on Mr Husseini’s representations.
CASTLE HILL
As in the case of the Blacktown parties, with respect to the Castle Hill parties, the conduct of Mr Husseini was limited to signing the Castle Hill disclosure document.
Castle Hill issue 1: Mr Husseini’s misleading representations
On 23 August 2017 Mr Mirdjonov received from UFG a draft franchise agreement and disclosure document. The Castle Hill disclosure document was dated 27 April 2017 and was signed by Mr Husseini: J [515]-[516]. In September 2017 the Castle Hill franchisee entered into a franchise agreement: J [526].
The primary judge found relevantly that the Castle Hill disclosure document conveyed a representation that the amount for building construction and fit-out costs was likely to be between $400,000 to $650,000: J [553]. The primary judge found that the representation was misleading because it was a representation as to a future matter and there were no reasonable grounds for making that representation because evidence to the contrary was not adduced and, in any event, because the evidence established that there were not reasonable grounds: J [591]-[593]. Mr Husseini does not challenge these conclusions in the appeal.
Castle Hill issue 1: Were Mr Husseini’s representations, in context, misleading?
The primary judge was satisfied, after considering the representations made in the context of the whole course of events, that Mr Hagemrad and Mr Husseini, and through them UFG, engaged in misleading conduct in contravention of s 18 of the ACL: J [594]. It is implicit, if not explicit, in that conclusion that the primary judge found that the representations in the Castle Hill disclosure document that he had earlier found to be misleading was misleading conduct on the part of Mr Husseini. Mr Husseini challenges that characterisation of his conduct.
The misleading representations in the Castle Hill disclosure document must be considered in the context in which the disclosure document was given to Castle Hill. The disclosure document is, of course, a document that UFG was required to give to Castle Hill under the Code before entering into the franchise agreement. Further, provision of the disclosure document came at the end of a process by which information and other representations about future income and establishment costs had been given to the Castle Hill parties by Mr Hagemrad and Mr Price and Mr Laurence (other agents of UFG).
On 12 June 2017 Mr Price represented that franchises for UFC gyms would be able to be established for start-up costs of approximately $1,000,000 to $1,200,000 depending on the site: J [537]. On 2 July 2017 Mr Laurence sent an email to Mr Mirdjonov attaching a financial model that included estimated start-up costs of $1,289,311.12. Excluding Life Fitness equipment, the estimate was $999,311.12: J [538]. On 7 July 2017 Mr Mirdjonov sent a financial model to Mr Laurence. It included estimated start-up costs of $1,522,711.12 and $1,232,711.12 excluding Life Fitness equipment: J [496]. On 10 July 2017 Mr Mirdjonov sent Mr Price an updated version of the financial model with materially the same start-up costs: J [503]. At a meeting on 20 July 2017, Mr Hagemrad endorsed the start-up cost in a financial model in the amount of $1,284,424.43. That amount excluded Life Fitness equipment: J [504]-[507], [550]. After the meeting, Mr Mirdjonov emailed Mr Price and Mr Hagemrad an updated financial model: J [508].
Schedule 5 Table 1 of the Castle Hill disclosure document sets out the ranges of establishment costs. These total between $820,500 to $1,244,000 plus identified costs for which no amount was specified: J [520]. The range for item (b) (equipment) was $350,000 to $500,000. That range was less than the estimate for equipment in the financial model Mr Hagemrad endorsed on 20 July 2017: J [570]. The range for item (c) (building, construction and fit-out) was $400,000 to $650,000. That was consistent with the estimate of $600,000 for those items in the 20 July 2017 financial model that Mr Hagemrad had endorsed: J [571].
The relevantly misleading nature of the representations in the Castle Hill disclosure document was that there were not reasonable grounds for the representations about the range of establishment costs. Therefore, the question for consideration is whether Mr Husseini’s conduct (his misleading representations) was misleading or likely to mislead in the context and circumstances in which the Castle Hill parties had received information from Mr Price, Mr Laurence and Mr Hagemrad that was not entirely consistent with the information contained in the disclosure document.
In my view, in the context and circumstances, Mr Husseini’s misleading representations were not capable of leading the Castle Hill parties into error. The relevant representations as to establishment costs were Mr Mirdjonov’s estimate, no doubt developed in consultation with Mr Price and Mr Laurence and endorsed by Mr Hagemrad, of the costs the Castle Hill franchisee would incur establishing a franchise business. In the circumstances in which the disclosure document was given it was clearly not provided as a document for Mr Mirdjonov to use to assess or evaluate the particular costs that the Castle Hill franchisee would incur in establishing a UFC Gym franchise business. The financial model endorsed by Mr Hagemrad served that purpose. It follows that the misleading general and qualified representations about the range of establishment costs usually encountered by new franchisees were not capable of misleading Mr Mirdjonov regarding estimates of the particular costs the Castle Hill franchisee was likely to incur because those particular costs were the subject of specific estimates and representations made about them by Mr Hagemrad and others.
I would uphold grounds C.1.a and C.2 of the notice of appeal.
Castle Hill issues 2, 3 and 4: Was there reliance on Mr Husseini’s representations?
Having regard to the conclusions I have reached on the characterisation of Mr Husseini’s conduct, it is not strictly necessary to address reliance. However, as with the Balcatta parties, the matter was fully argued and there is significant overlap in the grounds between characterisation and reliance, therefore, there is good reason to also deal with reliance.
The primary judge found that Mr Mirdjonov relied on the income, membership and performance representations conveyed in the financial model Mr Hagemrad endorsed on 20 July 2017 to agree to enter into the franchise agreement and guarantee: J [565]. The primary judge accepted that Mr Mirdjonov considered that the model reflected the ‘reality of the situation at Wetherill Park’ up to the point in time that the information was provided to him and a reliable forecast to the extent it related to the future: J [562], [565]-[568].

The primary judge found that Mr Mirdjonov had not relied on the representation in Sch 5 Table 1 item (b) (equipment costs) of the Castle Hill disclosure document because the range in the disclosure document was lower than the estimate in the financial model endorsed on 20 July 2017: J [570]. However, his Honour found that Mr Mirdjonov had relied on Sch 5 Table 1 item (c) (building, construction and fit-out) because that range was consistent with the estimate in the financial model: J [571].
As with the Balcatta and Blacktown parties, the primary judge made no specific finding and reached no specific conclusion that the Castle Hill parties relied on Mr Husseini’s conduct as an individual. There is also no specific finding or conclusion that the Castle Hill parties relied on the misleading representation about establishment costs to enter into the franchise agreement and guarantee. The express finding and conclusion of reliance in that respect is limited to reliance on the financial model. Nonetheless, it is implicit from the primary judge’s conclusion that Mr Husseini engaged in misleading conduct in contravention of s 18 of the ACL and his award of damages that he considered that the Castle Hill parties had relied on Mr Husseini’s misleading conduct in a way that contributed to them entering into the franchise agreement and guarantee.
The parties made largely the same contentions as those made with respect to the Balcatta and Blacktown parties concerning reliance and inducement with respect to the Castle Hill parties. Again, in an appeal by way of rehearing, this Court may reach its own conclusion on those matters and in that way correct any error.
In my view, the primary judge’s findings and conclusions about the Castle Hill parties’ reliance on the misleading establishment costs representation were not sufficient to support a conclusion that the Castle Hill parties entered into the franchise agreement and guarantee because of misleading representations Mr Husseini made as an individual. Therefore, as with the Balcatta and Blacktown parties, the critical link between the loss or damage the primary judge found that the Castle Hill parties suffered and the misleading representations of Mr Husseini was not established in the findings the primary judge made on the evidence. For much the same reasons with respect to the Balcatta and Blacktown parties, in my view, the correct inference to be drawn from the facts as found or undisputed is that the Castle Hill parties were not induced by any misleading conduct of Mr Husseini to enter into the franchise agreement and guarantee. Therefore, giving due respect and weight to the conclusions of the primary judge, I have come to a different conclusion.
As with the Balcatta and Blacktown parties and for the same reasons, Mr Mirdjonov’s affidavit evidence-in-chief concerning reliance was not reliable evidence, but inferences may be drawn from the established facts and evidence based on common experience and knowledge. Largely for the same reasons as those given concerning the Balcatta and Blacktown parties, it is improbable that the Castle Hill parties relied on Mr Husseini’s misleading representations in the Castle Hill disclosure document. It is more probable that Mr Mirdjonov relied on UFG as the source of the information and representations in that document.
It is also highly improbable that Mr Husseini’s misleading representations in the Castle Hill disclosure document were any real inducement for Mr Mirdjonov to enter into the franchise agreement and guarantee. The primary inducement were the income, membership and performance representations conveyed through the financial model Mr Hagemrad endorsed on 20 July 2017. That model included representations about start-up costs that Mr Hagemrad had also endorsed. The inference I draw is that Mr Mirdjonov relied on the income, membership and performance representations to enter into the franchise agreement and guarantee. It may also be inferred that he relied on the estimates of start-up costs in the financial model as a proxy for the purchase price for the new business. That is, the income, membership and performance representations influenced Mr Mirdjonov’s willingness to commit capital of around $1.2 million toward the venture. His willingness to commit that amount of capital may also have been influenced by his understanding of the reliability of the establishment cost estimates Mr Hagemrad endorsed on 20 July 2017. It was not influenced by the general representations about establishment costs in the Castle Hill disclosure document that came after Mr Hagemrad’s endorsement of Mr Mirdjonov’s own estimate of establishment costs.
I would uphold grounds C.1.b, C.2 and C.4 of the notice of appeal. It is not necessary to address ground C.4A. For the reasons already given, irrespective of the adequacy or otherwise of the primary judge’s explanation, the findings made were not sufficient to support the conclusion of reliance and I have concluded that on the facts found or undisputed the Castle Hill parties did not rely on Mr Husseini’s misrepresentations.
DAMAGES
Having regard to the conclusions, I have reached on the other grounds of appeal it is not necessary to address the grounds relating to damages. Also, as mentioned earlier in these reasons, although there is authority for the proposition that loss or damage may, in an appropriate case, be limited to a discrete part of a claimant’s loss or damage even though misleading conduct is a factual cause of all the claimant’s loss or damage, such questions of causation and damage are not straight-forward conceptually, legally and factually and these matters were not fully argued in the appeal. In these circumstances, I do not consider it appropriate to deal with the damages grounds in this appeal.
DISPOSITION
Balcatta parties
I would allow the appeal against the first to fourth respondents and make orders setting aside the judgment as against the appellant.
Blacktown parties
I would allow the appeal against the fifth and sixth respondents and make orders setting aside the judgment as against the appellant.
Castle Hill parties
I would allow the appeal against the seventh and eighth respondents and make orders setting aside the judgment as against the appellant.
Costs
I would award the appellant his costs in the appeal, set aside the costs orders made against the appellant in the proceeding below but, otherwise, reserve and hear the parties on the question of what, if any, orders should be made concerning the appellant’s and relevant respondents’ costs in the proceeding below. It is unclear to what extent the appellant was actively involved in other aspects of the proceeding before the primary judge that were decided against UFG and Mr Hagemrad, including dismissal of cross-claims. Therefore, allowing for the possibility of some mixed success, it is appropriate to reserve and hear the parties on the question of the costs below.

I certify that the preceding two-hundred and fifty-three (253) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.
Associate:
Dated: 12 November 2024

SCHEDULE OF PARTIES

NSD 551 of 2023

Respondents

Fourth Respondent:

PAUL CHAU

Fifth Respondent:

ACTIV HEALTH CLUBS PTY LTD

Sixth Respondent:

RICHARD KIM

Seventh Respondent:

ADVANCED CLUB MANAGEMENT PTY LTD

Eighth Respondent:

LAZIZ MIRDJONOV

Ninth Respondent:

ULTIMATE FRANCHISING GROUP PTY LTD ACN 607 187 860

Tenth Respondent:

MAZEN HAGEMRAD

Appeal from:	Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420 Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500
File number:	NSD 551 of 2023
Judgment of:	SARAH C DERRINGTON, STEWART AND FEUTRILL JJ
Date of judgment:	12 November 2024
Catchwords:	CONSUMER LAW – appeal from judgment where appellant found jointly and severally liable to pay damages under s 236 of the Australian Consumer Law – misleading and deceptive conduct under s 18 of the ACL – characterisation of conduct in context – misleading representations in Franchising Code of Conduct disclosure document – effect of disclaimers and qualifications – whether representations objectively misleading or deceptive or likely to mislead or deceive – whether representees subjectively misled or induced to enter into transactions – caution in accepting conclusionary and opportunistic evidence as to reliance – causation for the purposes of s 236 of the ACL
Legislation:	Australian Consumer Law ss 4, 4(1), 4(2), 18, 18(1), 236, 236(1), Chs 2, 3, 4 Competition and Consumer Act 2010 (Cth) ss 51AE, 131, 139B, 139B(2), 139G, 140B, Sch 2; Ptt IVB, XIAA Trade Practices Act 1974 (Cth) ss 51A, 82, 87 Competition and Consumer (Industry Codes – Franchising) Regulations 2014 (Cth) reg 4 Fair Trading Act 1987 (NSW) ss 18(1), 27, 28, 68 Fair Trading Act 2010 (WA) ss 18, 19
Cases cited:	3Meg.Com Pty Ltd v TM & SM Pike Pty Ltd [2012] WASCA 128; 43 WAR 350 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; 221 CLR 568 Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45 Australian Securities and Investments Commission v Narain [2008] FCAFC 211; 169 FCR 211 Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 Campell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 Chappel v Hart [1998] HCA 55; 195 CLR 232 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 DL v The Queen [2018] HCA 26; 266 CLR 1 Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 Frigger v Trenfield (No 3) [2023] FCAFC 49 Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 167; 2 FCR 82 Gould v Vaggelas [1984] HCA 68; 157 CLR 215 Henville v Walker [2001] HCA 52; 206 CLR 459 Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 Jones v Dunkel [1959] HCA 8; 101 CLR 298 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 54; ATPR (Digest) 46-048 Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] AC 883 March v E & MH Stramare Pty Ltd [1991] HCA 12; 171 CLR 506 Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 Medlin v State Government Insurance Commission [1995] HCA 5; 182 CLR 1 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 Pico Holdings Inc v Voss [2004] VSC 263 Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131; 220 ALR 211 Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd [1993] FCA 192; 41 FCR 229 Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195 Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 Tomasetti v Brailey [2012] NSWCA 399 Travel Compensation Fund v Robert Tambree (t/as R Tambree & Assocs) [2005] HCA 69; 224 CLR 627 Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 Water Board v Moustakas [1988] HCA 12; 180 CLR 491 Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447 Yorke v Lucas [1985] HCA 65; 158 CLR 661
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:	255
Date of hearing:	27 February 2024
Counsel for the Appellant:	Mr M Condon SC
Solicitor for the Appellant:	KDA Legal Pty Ltd
Counsel for the First to Eighth Respondents:	Dr A Greinke with Mr S Lamb
Solicitor for the First to Eighth Respondents:	Magnolia Legal Pty Ltd

ORDER MADE BY:	SARAH C DERRINGTON, STEWART AND FEUTRILL JJ
DATE OF ORDER:	12 NOVEMBER 2024

NSD 551 of 2023
Respondents
Fourth Respondent:	PAUL CHAU
Fifth Respondent:	ACTIV HEALTH CLUBS PTY LTD
Sixth Respondent:	RICHARD KIM
Seventh Respondent:	ADVANCED CLUB MANAGEMENT PTY LTD
Eighth Respondent:	LAZIZ MIRDJONOV
Ninth Respondent:	ULTIMATE FRANCHISING GROUP PTY LTD ACN 607 187 860
Tenth Respondent:	MAZEN HAGEMRAD