P C Yarak Pty Ltd v Quick Cash Advance Pty Ltd - [2018] SADC 26

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
P C YARAK PTY LTD & ANOR v QUICK CASH ADVANCE PTY LTD & ANOR
[2018] SADC 26
Judgment of His Honour Judge Slattery
29 March 2018
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION - STATEMENTS AS TO FUTURE MATTERS AND PROMISES
In 2009 the second plaintiff was the owner of broadacre land at Greenacres. Using the services of a business of the second defendant, Tuendemann, as a finance broker, he subdivided that land and obtained loans for the development of a house property on one of three blocks in the subdivision. In 2012, the second plaintiff approached Tuendemann again for assistance as a finance broker to obtain finance for redevelopment of the two vacant blocks in the Greenacres land. At that time Tuendemann encouraged the second plaintiff to invest in a type of business currently operated by Tuendemann called Quick Cash Loans. Tuendemann then made a number of representations to the second plaintiff about the profitability of the existing Quick Cash Loans business at Salisbury, about the possibility of opening a second Quick Cash Loans business and its likely turnover within eight or nine weeks, that such a business was a “gold mine” and that, as a corollary, Tuendemann was operating through the first defendant a gold trading business which generated about $2,000 per month. Tuendemann also said that due to a factoring arrangement, there were no bad debts.
As a result of the representations made to him, the second plaintiff did not proceed to redevelop the Greenacres land but decided to enter into a licence agreement with the first defendant for the operation of a Quick Cash business. In order to do so, the second plaintiff arranged for the settlement of a trust, the PCYarak Trust, and the incorporation of the first plaintiff as trustee. The Trust was the beneficial owner of any asset to be purchased and the first plaintiff acted as the trustee of the Trust.
In order to provide finance to the trust, the second plaintiff entered into a loan arrangement, organised by Tuendemann, to borrow $116,000 from the Commonwealth Bank, secured over the Greenacres property. The second plaintiff then made loans of that money to the Trust and a beneficiary loan in favour of the second plaintiff reflected these loans.
The first plaintiff purchased from the first defendant the right to operate as a franchisee of the first defendant’s Quick Cash business based entirely upon the representations made by the second defendant. These representations included:
•       That the first defendant was generating $10,000 per week in turnover at its Salisbury premises;
•       That the first plaintiff would, within eight or nine weeks, generate at least $5,000 per week at its proposed Klemzig premises based upon Tuendemann’s knowledge of the operations of the first defendant’s own business at Klemzig;
•       That due to a factoring arrangement, there were no bad debts;
•       That the first defendant would no longer offer Quick Cash loans from its Klemzig business;
•       The defendants would provide support and guidance to the first plaintiff in order to establish and successfully operate a business of Quick Cash Loans from the Klemzig store;
•       The first plaintiff would operate under the first defendant’s credit licence and the defendants would collect all payments made by borrowers on Quick Cash Loans under that licence and after deduction of fee would remit the balance immediately to the first plaintiff.
In reliance upon the representations of the defendants, the plaintiffs paid to the defendants the sum of $85,000 in consideration of the first defendant granting to the first plaintiff a licence agreement to operate a Quick Cash Loans business at Klemzig; $10,000 for a fit-out of the Klemzig premises; and $11,000 for the transfer of loan receivables from the first defendant’s Klemzig business and Salisbury business.
The representations made by the defendants to the plaintiffs were untrue. The first defendant had only operated the Salisbury business for three or four months at the time that the representations were made and there was no trading pattern established nor was any disclosure of financial documents justifying such a statement. There was no reasonable basis to suggest that the Klemzig shop could reach a turnover of $5,000 per week within eight or nine weeks and, over a two year period, that business was unable to generate on average any more than half of that amount per week. The defendants commenced operating a business providing Quick Cash Loans from its Klemzig premises during 2013. The defendants refused to remit the income of the plaintiffs after deductions during the 2013 and 2014 years and in the 2015 year, the defendants refused to remit any income of the plaintiffs after March. The defendants did not operate a gold trading business and there was no reasonable basis to predict that the plaintiffs could generate any income from such a business that was not then operated by the defendant. There was no factoring arrangement in existence.
In the 2013 and 2014 calendar years, the defendants withheld from the plaintiffs portions of the payment of the weekly amounts of interest payable to the first plaintiff arising out of the operation of the Klemzig premises. In the 2015 calendar year, the defendants refused to submit to the plaintiff any of the income to which it was entitled under the terms of the licence agreement after March. On 26 March 2015, the plaintiff required the defendants to restore the payments of income and to repay the outstanding balances belonging to the first plaintiff by 27 March 2015. The defendants failed to make any payment to the first plaintiff. On 1 April 2015 the plaintiff terminated the licence agreement for breach.
On the 17 day of September 2017 the first defendant was deregistered.
Whether the statements made by the defendants to the plaintiffs were misleading and were made in trade or commerce;
Whether the plaintiffs relied upon the statements made by the defendants when entering into the licence agreement;
Whether the statements made by the second defendant, Tuendemann, were statements made by a person for s 236(1)(a) of the ACL or were statements made by a person involved in a contravention of a provision of Chapter 2 of the ACL;
Whether, and if so on what basis, the plaintiffs were entitled to treat the conduct of the defendants of refusing to pay interest generated by the plaintiffs from their business as conduct justifying their termination of the licence agreement outside of the specific terms of that agreement;
Whether for s 4 ACL there was any basis for the defendants to make any representations about future matters.
HELD:
1.       The statements made by the defendants to the plaintiffs were made in trade or commerce and were misleading.
2.       The plaintiffs relied upon those statements in deciding to enter into the licence agreement with the defendants.
3. There was no reasonable basis for the defendants to have made the representations as to future matters and those statements were misleading and contravened Chapter 2 of the ACL and were actionable under s 236 ACL.
4.       The failure of the defendants to remit payments to the plaintiffs during 2013 and 2014, and then to completely fail to remit payments after March of 2015, were such serious breaches that they deprived the plaintiffs of a substantial part of the benefit for which they contracted under the licence agreement, and the plaintiffs validly terminated that licence agreement.
5.       The plaintiffs were entitled to terminate the licence agreement for breach and were not constrained to terminate under the terms of the licence agreement by giving two months’ notice.
6. The statements made by Tuendemann constituted conduct of a person for s 236(1)(a) ACL which conduct contravened Chapter 2 ACL and the plaintiffs are entitled to claim from Tuendemann payment of the loss or damage suffered as a consequence of the conduct of Tuendemann directly against him personally.
The plaintiffs claim for damages only for the payments made to the first defendant in the sum of $106,000 together with the sum of $42,920 being the total amount of the debts written off by the first plaintiff during the operation of the business.
Whether and if so on what basis the plaintiffs are entitled to recover the amount of the debts written off during the operation of the Klemzig business by the first plaintiff in its capacity as the trustee of the PCYarak Family Trust.
7.       The plaintiffs are entitled to an award of damages of $106,000 being the difference between the amount paid to the defendants and the amount that the business was worth at the time.
8.       The business was valued at nil as at the time the plaintiffs entered into the licence agreement.
9.       The first plaintiff claims only as the trustee of the PCYarak Trust, the beneficial owner of the business. In its accounts, that Trust has taken into account all of the debts written off before calculating annual net profit which was then distributed to the Trust beneficiaries. In order to claim for the loss of this receivable, it would be necessary to reverse out the entries in the Trust financial returns, for there to be a further exercise of discretion about Trust distributions and then the adjustment of the Trust accounts. Those accounts are settled and no claim may now be made to recover debts written off.
10. There was no occasion for the reduction of the plaintiffs’ damages pursuant to s 137B of the Competition and Consumer Act.
11.     The Court will hear the parties as to interest, costs and any consequential orders.
Competition and Consumer Act 2010 (Cth) Sch 2 ('Australian Consumer Law') ss 2, 4, 18, 236; Div 7, Part 11; s 137B; ch 2, 3; Competition and Consumer (Industry Codes – Franchising) Regulations 2014 Sch 1 ('Franchising Code of Conduct') cl 21, cl 25; Acts Interpretation Act 1901 (Cth) s 2C, referred to.
Myers & Anor v Trans Pacific Pastoral Co Pty Ltd (1986) ATPR 40-673, applied.

TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - IN TRADE OR COMMERCE
Houghton & Anor v Arms (2006) 225 CLR 553, applied.
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; Murphy v Victoria (2014) 289 FLR 337; Templar v Watt (No.3) [2016] NSWSC 1230, considered.

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COURT SUPERVISION - ADJOURNMENT
AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, applied.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION
Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115, applied.

TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - ENFORCEMENT AND REMEDIES - ACTIONS FOR DAMAGES - ASSESSMENT OR AVAILABILITY OF DAMAGES
Competition and Consumer Act 2010 (Cth) s 137B, Sch 2 ('Australian Consumer Law') ss 2, 236; Income Tax Assessment Act 1936 (Cth) s 99, referred to.
Myers & Anor v Trans Pacific Pastoral Co Pty Ltd (1986) ATPR, 40-673; Creative’s Landscape Design Centre & Ors v Platz & Ors [1989] FCA 370, applied.

CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RELATIONS BETWEEN PRINCIPAL AND THIRD PERSONS - RIGHTS AND LIABILITIES OF PRINCIPAL IN RESPECT OF CONTRACTS OF AGENT - FRAUD AND MISREPRESENTATION - OF AGENT
Acts Interpretation Act 1901 (Cth) s 2C; Competition and Consumer Act 2010 (Cth) Sch 2 ('Australian Consumer Law') ss 2, 18, 236, 237; Fair Trading Act 1999 (Vic) s 9; Trade Practices Act 1974 (Cth) s 52, 84, referred to.
Aiktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119; Houghton & Anor v Arms (2006) 225 CLR 553, applied.
Arms v Houghton & Ors VID 855 of 2005; R v Goodall (1975) 11 SASR 94 , considered.

P C YARAK PTY LTD & ANOR v QUICK CASH ADVANCE PTY LTD & ANOR
[2018] SADC 26
The parties and their claims

The plaintiffs sue the defendants for alleged breach of contract, misrepresentation (at common law) and conduct contrary to the Australian Consumer Law[1] (ACL) and the Franchising Code of Conduct. [2] During the trial of this action, I was informed that the first defendant Quick Cash Advance Pty Ltd had been deregistered. No application for reregistration of that company had been taken. The plaintiffs do not seek to press any claim against that company on the grounds of inutility. In the result, the claims are brought only against the second defendant in his personal capacity.
[1] Competition and Consumer Act 2010 (Cth) Sch 2.
[2] Competition and Consumer (Industry Codes – Franchising) Regulations 2014, Sch 1.
The first plaintiff is P C Yarak Pty Ltd (the Yarak Company). The evidence before the Court[3] indicates that the Yarak Company did not relevantly operate in its own right but only in its capacity as the trustee of the PCYarak Family Trust. The financial reports before the Court[4] indicate that all transactions involving the second plaintiff and the first plaintiff were conducted through the first plaintiff in its capacity as trustee. This was in circumstances where the second plaintiff was providing loan funds directly to the first plaintiff for the purposes of its operation. These loans are reflected in the financial accounts of the trust.[5]
[3] Exhibit P3 Tabs 32 and 70.
[4] Ibid.
[5] Ibid.
Even though the damages claim is brought by the plaintiffs, the principal claim for damages may only be brought by the Yarak Company in its capacity as trustee.
Summary and Result
The Yarak Company was incorporated on 31 May 2012 after an initial meeting between Mr Yarak and Mr Tuendemann (Tuendemann) at the offices of a business called Emparo at 378 Payneham Road Payneham. At the time Mr Yarak was seeking advice in relation to the proper method of exploiting his real estate assets.
At that time, representations were made by Tuendemann to Mr Yarak about the performance of his shop at Salisbury entitled “Quick Cash.” As the name probably suggests, the business of Quick Cash Loans was to make loans to borrowers of comparatively small amounts of money. These varied from $50 to several hundred dollars at an interest rate of 10 per cent per week. These were often called “payday” loans but there is a euphemistic quality about that expression. There appeared to be no set repayment terms and sometimes the loans continued on for a long time. There was no enquiry about the purpose of the loan which may never have been truthfully disclosed. In order to operate such a business an appropriate credit licence was necessary. In the absence of an operator holding a separate licence, it was necessary for an operator to conduct business under the protective ‘umbrella’ of a licenced operator.
Tuendemann encouraged Mr Yarak to become involved in the Quick Cash business and suggested to him that he open a Quick Cash shop at Klemzig because of the very high demand there for the loan products offered in that business. He said he was making $10,000 per week from his shop at Salisbury and also said that Mr Yarak would make a minimum of $5000 per week within a very short time at the Klemzig store and that turnover would increase over time. He also said that if Mr Yarak was prepared to take on the shop, Tuendemann would transfer to the business of the Klemzig shop $20,000 worth of customer borrowers to enable it to have an initial client base.
Mr Yarak was initially interested and further conversations occurred. In those conversations further representations of the same nature were made by Tuendemann including him giving glowing accounts of the amount of money that the Klemzig business would generate within eight to nine weeks and the likelihood that the turnover of the Klemzig shop would increase substantially. Tuendemann said that Emparo would no longer issue loans and that all loan customers would be referred by Emparo from its office at Klemzig to the Yarak Company at Klemzig. Surrounding these representations was also information supplied by Tuendemann that, in effect, the Emparo business did not have a bad debt problem from these loans because it had a factoring arrangement of some description.
Tuendemann also said that he was making $2000 per week trading in gold through Emparo and that, once established, the Yarak Company could trade in gold including at a daily cash price. The evidence about what this gold trading involved was initially vague. Ultimately it became clear that this business involved the buying and reselling of gold jewellery and the like. It was perhaps akin to an estate jewellery business. It was never made clear to me how the plaintiffs, guided by the second plaintiff, the proprietor of a pizza shop business and a property developer, would have the skill, knowledge and wherewithal to successfully conduct such a business.
In reliance upon the representations made by Tuendemann, the Yarak Company agreed to enter into an arrangement with Tuendemann and the first defendant. A store location was selected and a heads of agreement document, including a licencing agreement and a deed of covenant, were entered into. Under these arrangements the amount of $95,000 was paid by the Yarak Company to Tuendemann and the first defendant for the privilege of operating a Quick Cash business. The Yarak Company also agreed to operate the business under the system stipulated by Tuendemann, to remit interest and licence fees to Tuendemann on a monthly basis out of turnover and to operate as if, for all purposes, it was a franchisee of Tuendemann.
The representations made by Tuendemann were false and made without any basis. The first defendant had not been operating as a Quick Cash business for more than four months, there was no set trading pattern in relation to that business, there was no basis to make any prediction of the nature of the operation of the Klemzig store, there was no factoring arrangement, there was no reasonable basis to suggest that the Yarak Company as licensee would earn not less than $5000 per week, Emparo did not cease making payday loans, and there was no basis to suggest that it was possible for the plaintiffs to trade in gold.
Furthermore, the nature of the licence agreement was a franchise agreement for the purposes of the Franchising Code of Conduct under the Australian Competition and Consumer Act 2010. The agreements provided by Tuendemann to the plaintiffs did not comply with the requirements of that Code for a number of reasons, including that the provisions of the Licence Agreement relating to termination were in contravention of clause 21 of the Code and there was no disclosure document. The first defendant received from the plaintiffs the sum of $95,000 on 12 May 2012 and the second plaintiff entered into a lease agreement of a shop on OG Road Klemzig on 1 June 2012. This was about one and a half kilometres from the premises of the defendants’ Emparo business.
In breach of contract, the defendants failed to remit the whole of the interest payable to the plaintiffs under the terms of the agreement, made charges that were not otherwise stipulated under the terms of the contract and from about 1 March 2015 Quick Cash ceased payment of interest altogether.
In becoming a franchisee of the system created by the defendants, the plaintiffs relied upon the statements of the defendants and would not otherwise have entered into such agreements without having received those statements from the defendants. The Court is satisfied that the plaintiffs relied upon the statements made by the defendants in entering into the agreements and that the conduct of the defendants breached the requirements of s 18 of the ACL and that under s 236 of the ACL, the plaintiffs are entitled to an award of damages.
Some procedural observations

Mr Tuendemann did not attend the trial. Upon the request of the plaintiffs, I delayed the commencement of the trial until 10:20 am on the first day of trial.[6] At 10:20 am on the day of trial, I ordered an all courts call to be made for the first and second defendants. There was no response to that call. I have already recorded that the first defendant has been deregistered. That company was deregistered on 11 September 2017.[7] The reason given for deregistration is that contrary to the requirements of s 601AB of the Corporations Act, the first defendant has failed to provide the necessary corporate returns.
[6] Following an earlier Order of the Court, the commencement of the trial was delayed by one day.
[7] Exhibit P1.
The Court also received from the plaintiff a document from the Australian Securities and Investments Commission (ASIC) website dated 12 March 2018 in respect of Emparo Enterprises Pty Ltd and the first defendant. It was last updated on 28 March 2017. The document discloses that ASIC has cancelled the Australian Credit Licences for the first defendant after it was found that the first defendant failed to hold a membership of an approved external dispute resolution (EDR) scheme. It also records that on 8 August 2016 the Credit and Investments Ombudsman (CIO) cancelled Quick Cash Advance’s EDR membership due to serious concerns about serious misconduct in relation to the credit activities in which it engaged. Quick Cash Advance Pty Ltd, the first defendant, had been granted a credit licence to provide credit under credit contracts on 21 October 2011. The same document records that Tuendemann is the sole director of the first defendant. The credit licence of the first defendant was cancelled with an effective date of 22 March 2017.[8]
[8] Exhibit P2.
The Court had much earlier caused arrangements to be made to ensure that Tuendemann knew of the trial commencing on Wednesday 14 March 2018. I caused members of the staff of the District Court of South Australia to attempt to make telephone contact with Tuendemann to ensure that he was aware of that trial date. Apart from notices of trial sent to Tuendemann at his home address, I also caused attempts to be made to contact Tuendemann by telephone on 6 March 2018, 7 March 2018, 8 March 2018 and finally on 14 March 2018. The telephone number to which the calls were made had been provided by Tuendemann to the Court. On each occasion the telephone rang but was not answered.
On those same dates I caused members of the Court staff to make telephone contact with the Chief Financial Officer of the first defendant, Ms Carmel Napolitano on her own telephone number. The telephone rang but there was no response.
I also caused a registrar from the Civil Courts Registry of the District Court to call each of the numbers of Tuendemann and Ms Napolitano separately. I am satisfied from the information provided to me by the registrar that on each occasion the calls were made, the phone rang, but there was no response.
As a result, I was satisfied that having regard to all of the efforts made by all of the staff of the Court that all possible efforts have been made to ensure that Tuendemann knew about the hearing of 14 March 2018 and that his non-attendance at the hearing was a matter for his own decision.
Other materials such as the trial book and the tender books were sent directly to Tuendemann at his home address at Klemzig well prior to trial and as ordered by the Court. Emails were sent to his email address. Hard copy letters were sent to him in the ordinary mail.
It is also worthwhile to record the solicitors had previously acted for Tuendemann and the first defendant. On 26 May 2015, Commercial Legal (Legal Services) Pty Ltd filed a Notice of Acting for the defendants. Counsel, Mr M Douglas, had been briefed to appear. Then on 11 April 2016, a further Notice of Acting was filed by Travancore Legal and Advisory for both defendants. Mr Arnie Naryan and Ms Lecia Wood appeared. Then on 31 January 2017, Tuendemann purported to file a Notice of Acting for both defendants. On 27 February 2017 a Master of the Court informed Tuendemann that he could not represent the first defendant without a Rule 27 Order. He was informed that Travancore Legal remained on record as solicitor for the first defendant. On 31 March 2017, Mr Naryan from Travancore Legal and Advisory appeared and informed the Court that an application was being made for removal of that firm as solicitors for the first defendant. There was no appearance by Tuendemann at that hearing.
On 5 June 2017 the firm of solicitors Duncan Basheer Hannon filed a notice of acting for both defendants. The defendants were represented by counsel Mr Dal Cin and solicitor Mr Christopher Bruce. On 12 January 2018 an application was made by Duncan Basheer Hannon to be removed as solicitors of record.
On Wednesday 14 March 2018 at 9:45 am, the Court received an email from Tuendemann. It relevantly read as follows:
I wish to adjourn the above trial court case as I am suffering a severe medical condition, my Doctor has written a letter which I will forward to you today.
I have also been not represented in the correct fashion whatsoever with my previous Legal Counsel Christopher Bruce from DBH Lawyers.
I’ve also lodged a dispute with the Law Society Of SA in relation to this his poor performance also the short notice of not acting in timely manner or giving information when I have supplied and requested.
I will also advise any further updates in relation to the legal commission and the dispute thank you.
That email was not brought to my attention until well after the trial had been commenced. I caused an email response to be sent to Tuendemann through the Court on 14 March 2018 at 2:20 pm. It relevantly read as follows:
Please be advised that at the time Chambers received your email this morning requesting an adjournment, the trial in the above matter was already underway. Judge Slattery has decided the trial is to continue as scheduled, and is expected to take most of the next two days.
In a further email of 14 March 2018 sent at 3:28 pm, Tuendemann said relevantly as follows:
I request that Mr Judge Slattery adjourns this matter as my medical condition is severe due to the stress of this legal matter. I will forward my Doctors letter and also the Dispute that I have raised about my last Legal Counsel …
No up to date doctor’s certificate or letter was received by the Court.
On 14 March 2018 at 4:17 pm, a further email was sent from the Court to Tuendemann, the contents of which relevantly read as follows:
The trial of the action has now been adjourned to 2.15 pm tomorrow (Court 25). The plaintiff’s case is now closed. You are at liberty to attend the Court tomorrow afternoon and put before the Court such evidence and submissions that you see fit, personally or by your counsel.
At that time, you may also put before the Court any information that you possess and which you consider may assist the Court in reaching its decision about your application to adjourn the trial. Insofar as you seek to put medical information before the Court in the form of reports … it may be necessary to call the relevant doctor to give evidence as a condition of the acceptance of such a report. The Court will hear submissions on this and the other matters referred to above at 2.15 tomorrow afternoon, 15 March 2018.
Subsequently the Court received another communication from Tuendemann.
On 15 March 2018 the Court received by email submissions of the defendants dated the same date. In these submissions, the defendants sought an adjournment of the trial saying that Tuendemann was suffering severe anxiety and depression due to “the legal matter”. It suggested a medical report will be submitted. There was a bundle of material accompanying these submissions including a report from Dr Mario Giordano dated 31 July 2017. It explains to a Master of the District Court why Tuendemann had not complied with some of the earlier orders of the Court. It is not relevant to the issues for my determination. No further report has been received from the doctor. The submissions contain a reference to Tuendemann being treated by a clinical psychologist, Mr Rinaldo Minniti. There is no report from Mr Minniti enclosed in the submissions. The balance of the submissions involve Tuendemann informing the Court that he had made a complaint about his previous legal counsel and this takes up about two thirds or more of the document. It annexes a copy of Tuendemann’s complaint details. A complaint against former solicitors and counsel is not a relevant consideration on an application seeking an adjournment of a trial some two days after it has commenced.
There are other documents contained in the submissions which are irrelevant and although I have read them, I am unable to place any weight upon them. The submissions contain a letter from Carmel Napolitano without an addressee dated 15 March 2018. It appears to be a personal reference for Tuendemann.
None of this material is of any assistance to me in forming any view about the merits of Tuendemann’s application for adjournment of the trial and then the exercise of my discretion. There is no merit in any of the matters raised by him. There is no basis to exercise my discretion in his favour. In so deciding, I take into account all of the relevant authorities that bind me and particularly the High Court decision in AON Risk Services Australia Ltd v Australian National University.[9] I consider if this application for adjournment, so late in the day was allowed, it would be an example of: “…the torpid languor of one hand washing the drowsy procrastination of the other…”[10] Nothing within the written submissions filed on behalf of the defendants on 15 March 2018 satisfy me of the merits of their application for an adjournment or assists me in the exercise of my discretion. I am unable to discern any basis for granting this application from this material. The Court has no information before it to justify any assertion of incapacity of Tuendemann.
[9] (2009) 239 CLR 175.
[10] Ibid at [156] per Heydon J.
These materials make plain that Tuendemann was well aware of the date for trial in the Court and his need to attend court personally or by counsel to put any matter to the Court in evidence or in submissions. This has not occurred. As a consequence it was my decision to refuse the application and to proceed in the absence of Tuendemann. That is how the matter proceeded and I required the plaintiffs to formally prove their claims including for damages.
The pleaded case—causes of action
The plaintiffs allege that from about 5 December 2011, Quick Cash carried on a business in trade or commerce as a money lender in South Australia under the name Quick Cash Advance SA. It established marketing and products, goodwill and market recognition and standards and systems of quality control. It carried on the business of supplying services as a money lender in Australia under that brand.
The plaintiffs plead that the first involvement with Tuendemann occurred in early 2012 at the time when the second plaintiff was seeking advice in relation to the development of broadacre property at Greenacres. There were meetings at the offices of Tuendemann’s business called Emparo at Payneham. At the time, the second defendant was a real estate agent and financial advisor. The defendants became aware of the very favourable capital position of Mr Yarak due to his ownership of the Greenacres land. Mr Yarak was seeking to exploit that land for gain. It was at that time that the various representations were made by the second defendant to the second plaintiff.
Tuendemann said to Mr Yarak that he was making $10,000 per week out of a Quick Cash shop at Salisbury, that Mr Yarak should look at opening a Quick Cash shop at Klemzig or Elizabeth, there was a lot of demand for loans from Quick Cash, a shop at Klemzig would make a minimum of $5000 per week in a very short time and increase over time and that Tuendemann would transfer $20,000 worth of clients to the plaintiffs. These representations were repeated a number of times in telephone conversations between Tuendemann and the Mr Yarak in early March 2012. In particular Tuendemann represented to Mr Yarak again that he was making more than $10,000 per week out of his shop at Salisbury and that he had established a successful brand with goodwill under the name Quick Cash which would give the plaintiffs immediate market recognition. He also said that there were Quick Cash established internal systems including for quality control, there was a lot of demand for business in the Klemzig area, it was only necessary to open a shop to be successful and the business would generate recurrent business of $50,000 in circulating loans within eight to nine weeks. He continually repeated that the plaintiffs would commence to earn not less than $5000 per week less expenses within a matter of eight to nine weeks, that he made $2000 per week trading in gold and that the plaintiffs could make as much money out of trading in gold. Another assurance he continually gave to Mr Yarak was that his business of Emparo, operating at Klemzig, would no longer issue loans.
It is alleged that within about a week of those first conversations, Tuendemann informed Mr Yarak that there was no bad debt problem because there was within his operation a system for avoiding bad debts. Tuendemann told him that there was an arrangement with debt collectors who were prepared to purchase debts (a factoring arrangement) at the cost of paying the principal of the loan, so there was no real risk of the loss of principal. The trade-off was that this factor would take an assignment of rights under the loan contract and take the benefit of ongoing interest payments.
Following the receipt of those further representations and relying entirely upon them, Mr Yarak informed Tuendemann that he would invest in the Quick Cash business and would open a shop at Klemzig. There were subsequently inspections of stores and a choice was made for a shop on OG Road, Klemzig.
The plaintiffs allege that all the representations were made by Tuendemann to Mr Yarak in trade or commerce or for the purposes of the ACL. Insofar as representations concerned future matters, the plaintiffs rely upon s 4 of the ACL. The plaintiffs also allege that the promises to refer all loan enquiries received by Emparo to the plaintiffs and to provide a system to trade in gold were collateral promises and warranties which were breached. This was because no system was ever provided for the plaintiffs to trade in gold and from 2013, Emparo actively issued loans.
The plaintiffs allege that the representations were false, misleading, deceptive and a breach of warranty. The plaintiffs allege that Tuendemann was not making more than $10,000 per week out of the shop at Salisbury. The plaintiffs point to the fact that despite several orders by the Court, the defendants have never provided disclosure of the operation of the Salisbury office of Quick Cash. The plaintiffs also allege that the defendants had not established a successful brand and goodwill such that the Quick Cash business would have an immediate market recognition. It is also alleged that there was no demand for business in the Klemzig area, that there was no established relationship with debt collectors, that there was no factoring arrangement and that there was no reasonable basis to forecast that a Quick Cash licensee could commence to earn not less than $5000 per week within a matter of eight to nine weeks.
The plaintiffs then plead that on 1 June 2012, and in reliance upon the representations and the warranties made by Tuendemann, the plaintiffs entered into heads of agreement, a licencing agreement and a deed of covenant. The plaintiffs plead that the documents constituted a franchise agreement for the purposes of the ACL and the Franchising Code of Conduct. This was because there was a written agreement pursuant to which Quick Cash granted the first plaintiff the right to carry on the business of offering, supplying or distributing services, under a commercial symbol and under which the first plaintiff agreed to pay a fee including an initial capital investment fee and a fee for ongoing services. Therefore, the plaintiffs allege that the Franchising Code of Conduct governed that agreement at all times but that the agreement did not comply with the requirements of the Code. This is because the agreement contained a prohibition on transfer of the franchise contrary to cl 25 of the Code, it contained provisions as to termination which were contrary to cl 21 of the Code and it was not accompanied by a disclosure document.
The plaintiffs plead and there is no contest that on or shortly after 12 May 2012, in reliance upon the representations, and without receiving a disclosure document, the second plaintiff paid the sum of $95,000 to the first defendant. Also, on or about 1 June 2012 in further reliance upon the representations, the second plaintiff entered into a lease of premises in Klemzig and opened a shop under the provisions of the franchise agreement on 7 June 2012.
Under the terms of the franchise agreement, the first defendant was required to pay to the first plaintiff interest less monthly fees and franchise fees. In breach of those obligations the first defendant withheld deductions, photocopying expenses, interest on a loan of $50,000 made to a customer and interest on a loan made to another customer in the amount of $20,000. In total, the first defendant has failed or refused to pay the interest amounts in the sum of $8,590.95.
The plaintiff alleges unconscionable conduct against the defendant. The plaintiffs allege that from about November 2012 Tuendemann entered the premises at Klemzig without prior notice, threatened staff, sought to direct the first plaintiff to claim false qualifications, threatened to terminate the franchise and engaged in conduct not necessary or for the legitimate interests of the first defendant. Tuendemann caused Emparo to offer short term loans in competition with the plaintiff from 2013 and rebranded the website under which Quick Cash and the first plaintiff operated as Emparo Pay Day Loans which destroyed the Quick Cash brand.
Under the terms of the licencing/franchise agreement, and contrary to the Franchising Code of Conduct, the franchise was alleged to be personal to the licensee and could not be assigned, transferred or sublicensed without the licensee’s consent which may be withheld at the licensor’s absolute discretion. This is contrary to the Franchising Code of Conduct as cl 25 of the Code provides that a franchisor may not unreasonably withhold consent to the transfer of the business. On 19 June 2014 the first defendant did not provide disclosure information to a potential assignee Mr Charlie Flehan. On the same day the defendants informed Mr Flehan that he would have a better chance for approval if he took a new store direct from Quick Cash rather than purchase the Kelmzig store and then upon the insistence of Mr Flehan, the defendants refused to consent to the transfer. Secondly, on 8 August 2014, Tuendemann met with another intending franchisee Mr Mark Freer and failed to promptly provide disclosure information to Mr Freer and then demanded the payment of a fee of $5000 for the disclosure of information. Tuendemann on behalf of himself and the first defendant then informed the plaintiffs and Mr Freer that he would never agree to a transfer to Mr Freer because he felt that Mr Freer, a solicitor, was proposing to take over his business.
On 1 March 2015 Quick Cash ceased paying interest altogether and thereby evinced an unequivocal intention not to be bound by the franchise agreement. That repudiatory conduct was accepted by letter of 1 April 2015.
Notwithstanding the acceptance of the repudiation of the contract and the termination of it, the defendants have failed to make any payments of outstanding interest apart from March 2015. Since April 2015 the first defendant has retained all repayments of interest and principal by the first plaintiff’s customers.

The plaintiffs allege they have suffered loss and damage as a result of the defendants’ conduct as follows:
·The plaintiffs allege that they would not have entered into the franchise agreement but for the representations;
·The second plaintiff would not have entered into the lease;
·The second plaintiff and, as the evidence discloses, the first plaintiff have paid a sum of $95,000 to the first defendant for a business which is valueless;
·The first plaintiff has incurred bad debts of $42,920; and
·The second plaintiff has a contingent liability in respect of the lease.
The plaintiffs claim damages for misleading and deceptive conduct under s 236 of the ACL, damages for misrepresentation, compensation for unconscionable conduct under s 237 of the ACL, payment of the sum of $8,590.50 for interest unpaid, damages for breach of contract and warranty. The plaintiffs also claim interest and costs.
Not all of the causes of action pled against the first defendant are now pursued. The first defendant entered into the contract of licence with the plaintiffs. It was the decision of the plaintiffs to use the Yarak Company and the PCYarak Family Trust as the vehicle for the conduct of the business. However, accepting that the intention of the parties was for the Yarak Company to be the licensee (and it was of no moment to the defendants which vehicle was used by the plaintiffs to carry the business forward), it is important to recognise that the contract was made between the corporate first defendant and the corporate first plaintiff (in its capacity as trustee). It follows that any claim for breach of contract could only subsist as between those corporate entities. No separate contract was made between the second plaintiff and the second defendant. So also, in relation to the Franchising Code of Conduct, it was not necessary for Tuendemann to provide disclosure statements or to do other things required under the Code. Also, it was not Tuendemann who failed to remit interest or engage in conduct contrary to the Franchising Code in relation to the sale of the business. All repudiatory conduct is committed by the first plaintiff and Tuendemann, but any damages claimable by the plaintiffs under the causes of action pled by them must clearly be understood to relate to the conduct attributable to Tuendemann, those plaintiffs having abandoned any claims against the first defendant. As a result, any claim that may be maintained for damages (if that be the case) are maintainable only against Tuendemann. This result excludes a large number of statutory and common law claims that may have been brought against the first defendant that sound in damages. Thus, the focus of the plaintiffs’ claim is only upon Tuendemann and his conduct.
In that background, it is then necessary to review the evidence.
The evidence of Mr Yarak
Mr Yarak was the only witness called for the plaintiff. He first had contact with Tuendemann on 27 September 2009. Tuendemann was a finance broker who had been referred to him by another acquaintance. Mr Yarak had land in Greenacres that he wanted to subdivide into three blocks. He saw Tuendemann again later in 2011. This was to get finance for a house to be built on one of the three subdivided blocks. Tuendemann made the arrangements for the finance. He made the loan application on 15 May 2012. He also asked Tuendemann to be a finance broker on the other two blocks. He wanted to build homes on those blocks. At that time (May 2012), Tuendemann told him that a better idea rather than investing in real estate was to invest in a business that had a very high return.
This business possibility was first raised by Tuendemann at the time that Mr Yarak was seeking a loan. Tuendemann told him that he had an idea that was better than making money in real estate.[11] The conversation occurred by telephone while Mr Yarak was at a pizza bar he owned in Prospect, on Regency Road.
[11] T31.32.
In the conversation Tuendemann told him that he was making a $10,000 weekly turnover at the shop at Salisbury. He said that he had two further store locations in mind for this business: one at Elizabeth and another one at Klemzig. In relation to the Klemzig store, Tuendemann told him that as the Salisbury store pulls in $10,000 worth of clients per week, there is no reason why Klemzig could not make anything less than $5000 per week. He said that it should make $5000 and there was no reason why it could not reach the same turnover as the Salisbury store at $10,000 per week. Tuendemann said to him that it would only take eight to nine weeks to get up to $5000 per week. Tuendemann said that Klemzig had a high demand. He said that he did payday loans from Emparo’s store which was in Klemzig. He knew through his Emparo store that there was a high demand for payday loans in the Klemzig area. Some of these representations are obviously about future matters concerning the Klemzig store. It will become necessary to keep that distinction in mind.
Tuendemann advised him that he needed to do advertising in the local Messenger and on Gumtree as well as handing out flyers through the mail. He said that was all that was necessary in order to achieve that turnover.
There was a later meeting at Tuendemann’s Payneham office. This was a couple of weeks after the phone calls. The office is on the corner of OG Road and Payneham Road and is where the business called Emparo Finance operated. He had a conversation with Tuendemann at that premises that lasted about 45 minutes. Mr Yarak said that it was a very exciting conversation and Tuendemann was very positive about everything that he said.
In that conversation Tuendemann gave him more detail about what he thought the Klemzig premises would make.[12] Tuendemann told him that there was interest in the Klemzig store, someone who was previously interested now wanted to buy it and that he thought that the Klemzig store had great potential. He used an expression that Mr Yarak heard many times. He stated that the store was a “gold mine” and that the operator of the store would in eight to nine weeks reach a turnover of $5000 and basically the sky is the limit as to how high that turnover would go. He did not specifically use the words “sky is the limit” but that was the understanding in the mind of Mr Yarak. This was because Tuendemann kept continually using the words “gold mine” to him when describing the potential for the store. The overall impression created in his mind was that a turnover of $10,000 per week was very achievable.[13] I am satisfied from this evidence that, on an overall basis, Tuendemann was intentionally creating in the mind of Mr Yarak a very positive view of the potential for the Klemzig store and so creating in the mind of Mr Yarak an overall impression of the very favourable possibilities for the store.
[12] T34.8.
[13] T34.30.
Further, during this same discussion, Tuendemann continually repeated that he was making $10,000 per week in the Salisbury store. He also discussed the requirements for marketing the proposed Klemzig store.
Initially Mr Yarak thought that there was a later discussion about transfer of clients but he corrected himself and said that at the same discussion where he talked about the potential turnover for the Klemzig store and the “gold mine” statements, Tuendemann told him that he would transfer $20,000 worth of clients so that he would have about a $2000 per week turnover from day one. He would have to pay dollar for dollar for those customers, namely $20,000. This was because he was told that there was $20,000 worth of loans and that was how much he would be paying. There was no discussion therefore in relation to any concept of mark-ups or for that matter discounts from the value of the loans. He was paying dollar for dollar.[14] The plan was that once these files for $20,000 were handed over, those customers would become his customers, the files would be handled from the Klemzig office and any repeat business would come to him.
[14] T36.5.
There was also a discussion about the payment of overheads. Tuendemann said to Mr Yarak that the client base he would give him would assist him to deal with the overheads. That is because Tuendemann told him that he would be making a profit from day one so that he would be able to cover his rent, wages, electricity and other utilities. It would also assist in paying the costs of advertising for the business.[15]
[15] T36.26.
Tuendemann told him that he would be using his credit licence to lend money. Mr Yarak did not have much understanding of that concept.
Mr Yarak gave evidence that from the outset, one of his major concerns was the collectability of the debts. He raised this issue on a number of occasions in the preliminary discussions with Tuendemann. He asked Tuendemann what was to happen when people decided not to pay back their debt or their loans. He asked Tuendemann that direct question. Tuendemann’s response was that there was a system in place whereby a debt collector would purchase the principal loan and the business would earn everything above that. Therefore, if there was a $100 loan and it had, as a result of interest increased to $150 or $200, then the debt collector would purchase the loan on a factoring basis at $100. Therefore, the business would not lose its initial principal. Mr Yarak said in evidence, which I accept, that that was a very important issue for him and it reinforced everything that Tuendemann was saying to him, particularly that the nature of the business was a “gold mine” because there could be no loss. He had a clear understanding from what Tuendemann said to him that under this factoring arrangement, he would be paid 100 cents on the dollar for the amount of the loan rather than for the debt owing under the loan.
Mr Yarak said that after the initial stages, there was also a discussion about selling gold. These conversations occurred a little later. Tuendemann told him that he was purchasing gold at the Emparo store at Klemzig (the Payneham Road store). The conversations about gold occurred over the telephone. There was an earlier conversation in which Tuendemann told him that he was earning about $2000 a week by buying and selling gold. In that conversation, Tuendemann told him that he would be definitely incorporating the purchase and sale of gold into the Quick Cash business that he, Mr Yarak, was looking to purchase. He also told him that he could make money from the sale and purchase of gold. He described it as the “cream on the top” of the business. He understood that what Tuendemann was saying was that the sale and purchase of gold was like extra money basically on top of cash lending.
Mr Yarak was very interested in what Tuendemann was saying to him. As far as he was concerned, any extra money was good money. He was therefore prepared to follow up on that matter based upon what Tuendemann was saying to him.
After all of these conversations, Tuendemann found two premises as potential stores. They went to look at the stores together. The first was in Hampstead Gardens on North East Road near Klemzig. The second was at 50 OG Road Klemzig, this being walking distance from the Emparo store in Klemzig which was on Payneham Road. This shop had an external shopfront. Mr Yarak made a decision to proceed with the tenancy of that store. This was at the time that he made the decision to proceed with the purchase of the business. He did that by speaking to Tuendemann. He asked Tuendemann which he thought was the better store and Tuendemann said that he thought it was Klemzig. He then provided him with the lease documents.
Mr Yarak also had a discussion with Tuendemann about purchasing the business. He entered those discussions based upon his reliance upon the statements made to him by Tuendemann. They had a discussion about purchase price. Tuendemann told him that the purchase price was $85,000 to, in effect, enter into a franchise, $10,000 for setting up costs which was basically for painting the shop, buying desks and other items such as computers. Thus, he understood that he would be paying $95,000 to enter into the arrangement. At the time, Tuendemann did not say to him to whom that money was to be paid but eventually, under the terms of the agreement, the money was paid to Tuendemann directly. As well, he was required to pay $20,000 for the customers that were going to come to him, he having decided to proceed with the purchase. However, when those conversations occurred about that topic, Tuendemann told him that he had spoken to his accountant who had advised him that it would not be a smart thing to do to sell off $20,000 worth of customers, but that all that Mr Yarak would need would be $10,000 worth of customers to help him cover the costs of running the business. Tuendemann said at the same time that he could still make more money by buying and selling gold and he said that he himself was making about $2000 per week. He did not forecast how much he might make by selling gold but said that this was the “cream” on the top.
Once he indicated to Tuendemann his agreement to purchase the business, it was Tuendemann who arranged a loan of $116,000[16] from the Westpac Banking Corporation. This was arranged about April 2012. He was also provided with a licencing agreement.[17] The agreement was entered into by the Yarak Company in its capacity as trustee. He thinks that the word franchise came up in these discussions but he knows that he signed a licence agreement so he cannot be sure whether there was a discussion about franchises. He did not receive any document purporting to be a disclosure document under the Franchising Code of Conduct. All that he received was a licence agreement. At page 44 of the agreement, it discloses a nominal commencement date of 12 April 2012. This was before the incorporation of the Yarak Company which occurred on 31 May 2012. He said that those arrangements were all made through the accountant Ashman, who was also the same accountant used by Tuendemann. He left all of those arrangements in the hands of the accountant.
[16] Exhibit P4.
[17] Exhibit P3 tab 11.
Under the licence agreement, he was required to pay 12.5 per cent licence fees. That licence fee had been discussed at the second conversation at the Emparo store at Payneham Road Payneham. The arrangement was that all of the interest would be collected through the Emparo business by Tuendemann, the interest payable would be reduced by 12.5 per cent, and this would be deducted by Tuendemann from source. Initially, he was required to pay $1000 per month as a further licence fee. That became $250 per week plus GST. This was also arranged in the first conversation at the Emparo store when there was a discussion about the 12.5 per cent licence fee. He was told that he had to make this payment because he was using the licence belonging to Tuendemann. Because he did not have a credit licence himself, he had to be charged a fee for using the credit licence belonging to Emparo.
He also was required to pay a promotion fee because Tuendemann said he would be promoting the business. Tuendemann was promoting the business as a whole so the Quick Cash businesses at Salisbury and at Klemzig were being promoted. However, he is not aware of any promotion ever being done by Tuendemann in consideration of being paid the promotion fee.
Mr Yarak thought that it was reasonable that he should have to pay all of these fees.[18] His view was that having regard to what Tuendemann had said to him, that it was going to be a forever growing business and that he could not lose. He could even reach a turnover of $10,000 per week, he would take out 12.5 per cent plus another $250, namely $1,500. He would still be left with $8,500 in his hands. He thought that that was very good money and he did not ever consider himself to be greedy about that. As far as he was concerned, if Mr Yarak was making money he was happy for Tuendemann to make money at the same time. That was his thinking, relying upon everything that he had been told by Tuendemann. It was all based upon the very positive nature of what Tuendemann was saying to him about what the business could do. This was based upon what Tuendemann was representing to be the turnover in his current store in Salisbury and he understood there to be a seamless transition into the Klemzig store using the same process.[19] His understanding was that if Tuendemann could make that sort of money at Salisbury, he could certainly make that money at Klemzig. His view was that this was what it was going to cost him to get where he wanted to be and the only detraction from that process of thinking was the reduction of the $20,000 worth of customers to $10,000. He genuinely believed, based upon what Tuendemann was telling him, that it was a gold mine that he was buying.
[18] T43.26.
[19] T44.9.
He was referred to paragraph 2.2(b) of the licence agreement.[20] The establishment fee and the licence fee were required to be paid directly to Tuendemann and not to the first defendant company. Mr Yarak knew that the payment was to go direct to Tuendemann but he did not think twice about it.
[20] Exhibit P3 p48.
Mr Yarak decided to borrow against the other two blocks at Greenacres. He borrowed $116,000 using Tuendemann as the finance broker. He paid $95,000 to set up the store. This included $85,000 for a licence fee plus $10,000 for a fit-out and then he paid $11,000 for customers’ loans. This was $106,000 in total[21]. This is reflected in the heads of agreement that he signed.[22] He does not now recall when he signed the document.
[21] The plaintiffs’ original claim was for the amount of $116,000, however the evidence makes clear that the payments made for the business totalled $106,000, and so any claim beyond that amount cannot be sustained. The only reference to the sum of $116,000 concerned the borrowing from the bank by Mr Yarak to fund the loans into the Trust as purchaser. Not all of those funds were used to pay the purchase price.
[22] Exhibit P3 tab 10 p39.
Mr Yarak borrowed the $116,000 from Westpac to go into the transaction. This was secured against two of his properties at Greenacres. In time, he had to sell both properties to repay the loan. That was done in 2013.
Mr Yarak understood that there was a requirement to have a cash trading fund of $50,000 and an ongoing ability to have $5000 to lend on hand.[23] He had a discussion about that with Tuendemann who told him that in order to get to a turnover income of $5000 per week, it would be necessary to lend out $50,000 worth of loans. Thus, he would be making about ten per cent per week on his loans.
[23] Exhibit P3 p51; T45.20.
He also recalls that there was a fitout done. Tuendemann painted the store himself, he only bought second hand computers, some tables from Ikea, some chairs and a desk. He did not think that the fitout would have cost any more than $5000. However, he did not complain about that fact to Tuendemann. He was aware of para 3.8 of the licence agreement.[24] This is under the heading “Licensor’s Systems and Software”. From those obligations, he did receive two dedicated email addresses, but he did not receive internet website with back end and monitoring of loans performance, arrears percentage. He also received a 1300 number but he received no ongoing support from the licensor. He also did not have any monthly meetings or mentoring from the licensor nor did he receive monthly reports on the back end of the internet website. He did have the benefit of the licensor’s credit licence for the business.
[24] Exhibit P3 p53.
During the 2013 year Mr Yarak had a lot of difficulty with Tuendemann. He was bullying his staff and it became necessary for his staff members to confront Tuendemann about the way he was speaking to them. Mr Yarak also had his own health issues. He had heart arrhythmia which led to episodes of ventricular tachycardia. That is brought on by loss of sleep, severe stress or a combination of those things. The symptoms are shortness of breath, dizziness and chest pains. As a result of treatment, he has now had a pacemaker and defibrillator inserted. Tuendemann knew about this and knew about the impact all of the stress was having on Mr Yarak’s health during 2013.

Exhibit P3, Tab 14 is the Quick Cash Advance Manual. Mr Yarak was given this by Tuendemann. This is the system proposed by Tuendemann for the advancing of cash. Effectively, the customers approach the store. They are asked for identification, three months’ bank statements, sources of income including Centrelink benefits and something of a history. If it makes the loans, then Quick Cash recovers interest payments from the customers. Those interest amounts are ten per cent per week. The interest is recovered using a debiting system called Ezidebit which is operated by an external supplier. It effectively withdraws money from the bank account of the borrower and then transfers it into the account of Tuendemann. This is done three times a week. At the end of each week, Tuendemann tallies how much has been paid, makes deductions and purportedly transfers the balance to the Yarak Company’s bank account. He therefore controlled all of the funds to the Yarak Company.
Mr Yarak found that in the reality of the Klemzig business, the payday loans varied from between $50 to $500 and some of them stayed out for weeks and some of them stayed out for up to two years. This was notwithstanding the weekly interest rate. He found that some people were prepared to pay that high interest rate until they were able to pay back the full loan. He never really knew why people were seeking the loans in the first place.[25]
[25] T50.26-T51.23.
One of the weaknesses of that system was that it was possible for customers to cancel the direct debits with their bank using the Ezidebit system. He found that people would take the loan, get charged interest for one week, then go to the bank and terminate the Ezidebit authority. That way banks cancelled any direct debits from the bank accounts of the borrowers. The loan would then be treated as being in default and attempts would be made to contact the customer and to seek repayment. Mr Yarak said on most occasions such loans ended in default. This is reflected in Exhibit P3, tab 14, p 85 which is referred to as the “Quick Cash Advance Dishonours” document, which describes the system for contacting clients for payment. This system was implemented and was proposed by Tuendemann. If all of his efforts failed, then Mr Yarak’s understanding from what he had been told by Tuendemann was that he would be selling the principal debt without interest and fees to a factor. That never occurred.
After all of the preliminaries, Mr Yarak opened the shop on 7 June 2012. There were no initial customers. The plaintiffs put flyers out on the market and advertisements in papers. A little while later customers began to come in but Tuendemann gave no assistance. He spoke to Mr Yarak and used a description about the demographic of the community in a very derisory way. He described the people living around Klemzig as “scum.” He used expressions such as: “these kind of people will attract their kind so these three people will go to tell their friends and your business will increase.”[26]
[26] T54.5.
The customers that were transferred to the first plaintiff by Tuendemann were bad payers. Mr Yarak had a discussion with Tuendemann about the fact that these were bad payers. He asked Tuendemann whether there was anything they could do to recover the debt and Tuendemann told him that there was nothing really he could do. This was contrary to the statements made by Tuendemann about the debt collector/factor arrangements. Tuendemann told him that he did not have a relationship with the debt collector, notwithstanding everything that he had said to him before the agreement was entered into.[27] Tuendemann then told Mr Yarak was that this was something they were working on. There was no debt collection/ factoring arrangement.
[27] T55.10.
Mr Yarak was working two jobs at the time. He would go to the Quick Cash shop at about 10:30 in the morning and would stay until about 2:00 to 3:00 in the afternoon. He would then go to his pizza bar at Ridgehaven and he would stay there until about 11:00 pm to midnight. He would then go back to work at the Quick Cash store the next day. He had an employee at the Quick Cash store called Patricia Hamblin and she worked from open until close which initially was 9:00 am to 4:00 pm, then 9:00 am to 5:00 pm and that then changed from 10:00 am until 4:00 pm. She was paid a weekly wage. He paid himself no wages from the Quick Cash business. The only person who received wages was Patricia Hamblin.
When nothing happened in relation to the gold trading, he asked Tuendemann when the first plaintiff would commence trading in gold and he had discussions with Tuendemann about how this gold trading process would work. In the course of that, he bought a machine for testing gold on the recommendation of Tuendemann. The machine assessed the purity of the gold and its weight. Tuendemann said that he would buy back the gold at 20 per cent above the price paid by Mr Yarak to his customers. No transactions ever took place and so at no stage was gold purchased or traded. Tuendemann refused to give him any date for the commencement of gold trading from the Klemzig store; this required input from Tuendemann because of the plaintiffs’ lack of experience. Mr Yarak did try to promote the gold buying but had no success.
Although the evidence on the topic was unclear, this gold trading involved purchasing gold pieces such as jewellery from the public and reselling the same pieces at a profit. It is unclear on the evidence whether Mr Yarak actually understood this process during the initial discussions with Tuendemann.
In Exhibit P3 at tabs 32 and 70 are the financial statements for the PCYarak Family Trust of which the Yarak Company was the trustee. These were prepared by Ashmans, accountants who were the same accountants for Tuendemann. They record gross sales in 2013 of $101,943. They also record an expense of bad debts written off of $31,230 and salaries of $27,818 plus SGC contributions. The loan sales figures are the net figures after Tuendemann has deducted his expenses. In the 2013 year, the plaintiffs achieved about $2000 per week of sales. The average debt write off per week was $750 or about 37.5 per cent of turnover.
It was in the 2013 financial year that Mr Yarak began experiencing difficulties directly with Tuendemann. In Exhibit P3 tab 44 is a letter of 23 July 2013 to Commercial and Legal, Tuendemann’s solicitors from Mr Yarak’s solicitors. It refers to the fact that the payments of the balance of the customers’ interest payments were stopped in 2013 and this had arisen as the result of a complaint that was raised about transfer arrangements. As of 2 August 2013, Tuendemann had withheld three weeks payments and was only prepared to release one payment as a gesture of goodwill. That payment was in the amount of $2,171, which continued to be about the average weekly trading. This was one year after the shop had been opened and despite the expectation that he would be getting $5000 per week within eight to nine weeks. Eventually the arears owing by Tuendemann reached $23,000.
In 2012 and 2013, Mr Yarak had realised that the representations made to him were false and he then set about attempts to get out of the shop. He knew a Mr Charlie Flehan and he had discussions with Mr Flehan about the possibility of him buying the shop.[28] The discussions never got to the point of discussing a price. He had referred the interest from Charlie Flehan on to Crystal Warren, an employee of Tuendemann at his office. However, he also became aware at about that time that Tuendemann was offering payday loans. He personally received a document[29] dated 29 April 2013 from the Emparo office/business at Klemzig that it was offering payday loans. This was sent to Mr Yarak’s home address at Salisbury Heights. This was in breach of the promise made by Tuendemann before the documents were signed that he would not go into competition on payday loans from the Emparo office. Tuendemann had said that any customers that Emparo got for payday loans would be referred to Mr Yarak.
[28] Exhibit P3 tab 68.
[29] Exhibit P3 tab 30.
Sometime later[30] he received a telephone call from Tuendemann saying that he was going to reopen the payday loans business at Emparo. He said there was a large enough demand for both of them. This all occurred less than one year after he had opened the Klemzig store and at a time when it was generating sales of about $2000 per week. As a result, Tuendemann intended to open a shop within walking distance of Mr Yarak’s shop. This had a severe impact upon Mr Yarak’s health and worsened his physical condition.
[30] Exhibit P3 tab 26.
A second potential purchaser identified by Mr Yarak was a Mr Mark Freer. He was a solicitor who had a migration agent practice. He had taken premises in the shop next door to Mr Yarak. In conversations with Mr Freer the subject of the sale of the Quick Cash business came up and Mr Freer told him that he saw it as a good business to operate with his own existing business. Initially, there was some cooperation in relation to Mark Freer buying his business.[31] That soon changed because of the conduct of Tuendemann who set about to reject any potential purchaser brought to him by Mr Yarak. As an example, Mr Yarak remembers that 16 July 2014 was the first date that he was told that Tuendemann now intended to sell stores to husband and wife teams and not to people (such as Mr Freer) who had multiple companies. And, this was about the time that Tuendemann and his staff started talking about selling franchises. Also, he knew that Tuendemann was preparing letterheads for the Klemzig store ascribing qualifications to Patricia Hamblin that she was registered under ASIC. He spoke to Tuendemann about that because Ms Hamblin did not have that qualification. Tuendemann told him that legally they needed to have this on the document.
[31] Exhibit P3 tab 71; tab 72.
Eventually Mr Freer was not successful in purchasing the franchise business because Tuendemann wanted to charge him $5000 for preparing documents. Ultimately, Tuendemann would not allow the sale to go through. Mr Yarak had one conversation with Tuendemann about this refusal. It was the day after he had had pacemaker surgery and Tuendemann said words to the effect that he was not going to sell a business to a bikie. He thought that Charlie Flehan was a bikie. Also, Mr Yarak later learned that when he was in discussions with Mr Flehan, and Mr Flehan was referred off to Tuendemann, that Tuendemann tried to put Mr Flehan into another shop and not the Klemzig shop.[32]
[32] Exhibit P3 tab 66.
Tuendemann also refused to sell to Mark Freer. In a letter he said that he was not going to be selling to bigshots that want to take over his business or steal his ideas. Ultimately, by email of 13 October 2014[33] sent to Mark Freer, Tuendemann said that the reason he would not sell the business at Klemzig to Freer is that Freer is a sophisticated investor and not a family concern. He would not allow Freer to buy the shop or to look into how the shop operated. There had been a series of exchanges between Freer and the advisors to Tuendemann and to Tuendemann personally trying to get information concerning the operation of the Klemzig shop. This culminated in the letter of 13 October 2014 in which Tuendemann refused to deal further with Freer.
[33] Exhibit P3 tab 86 p385.
In the 2014 year, the business generated sales of $139,696. Salaries and wages were $38,809 all of which had been paid to Ms Hamblin. Bad debts written off were in the amount of $30,150 and the net operating profit was distributed almost entirely to Mr Yarak’s partner Carol Keddo. By this time, namely 2014, he had been in business for well over one year. Turnover was about $2,700 per week and this was nowhere near the $5000 that had been initially represented to him or near the $10,000 that might have been achieved according to the predictions made by Tuendemann.
Mr Yarak’s thoughts of sale started in 2013 and that is when he did something about it. He stayed open in the hope of maintaining the asset and finding a buyer. The business was slightly cash positive at that stage but in order to achieve that, he had to work all of the hours in the shop unpaid. He continued working the same hours notwithstanding his health difficulties. He had also formed the view by 2013 that all of the statements as to the prospects for the future of the Klemzig store made by Tuendemann could not be fulfilled.
Prior to him speaking to Mr Flehan and Mr Freer as potential purchasers, Mr Yarak attempted to sell the business on the open market. He consulted three business brokers. The first, a Terry Mekos, was introduced to Mr Yarak by Charlie Flehan. He had a number of conversations with Mr Mekos who was enquiring about how the business worked. He had more conversations with another business broker, Mr Versace from Versace Business Brokers. He also had a conversation with someone from Raine & Horne. He found Versace Business Brokers through a Google search. He had a conversation over the phone and the first enquiry he received from Mr Versace was, how could anyone guarantee that the money lent would be repaid. Mr Yarak said that he could not guarantee that. Once he received that information, Mr Versace was quite blunt with him and said that he did not think that he could find someone interested in a business like that. It was a deal breaker. The conversation with someone from Raine & Horne was only a very brief phone call. He really did not receive any assistance from Raine & Horne. That company really had no interest in taking on an agency.
As a result of those conversations, Mr Yarak formed the impression that this would be a very hard business to sell. It was not going to be an easy process, perhaps impossible. That is why he then looked around for other people to be purchasers through his own direct contacts, namely Charlie Flehan and later Mark Freer.[34] Mark Freer to an extent was a coincidence because he was working in the area.
[34] T81.23-.33.
Mr Yarak said that he kept his doors open in 2013 and 2014 only in an attempt to recoup some of the money that he had spent. It was not until the end of the negotiations between Tuendemann and Freer[35] that he realised that there was no possibility of ever having the business transferred. It was then that he made a decision to close the doors of the business. Before that, he had attempted to get Tuendemann to buy the business back from him, but that failed. He expressed no interest in that matter. Tuendemann continued to refuse to pay the balance of the interest payments in full throughout 2014 and into 2015. The reason given was that because solicitors had been retained by Mr Yarak, Emparo and Tuendemann were refusing to deal with him; apparently this was the way that Tuendemann displayed his disapproval of Mr Yarak attempting to preserve his own legal rights. That caused him tremendous stress and difficulty. It affected his health immensely. After 1 April 2015 he closed the doors of the business and found shortly afterwards that the locks were changed. He had to pay off Patricia Hamblin by giving her two weeks’ pay in lieu of notice. He took the files of their loans. However, once the locks had been changed he could do nothing with the shop. He is now aware that the Quick Cash Advance business has been deregistered and has lost its credit licence.
[35] Exhibit P3 tab 86 p385.
Mr Yarak said and I accept that the reason he went into the business was because of all of the representations made to him by Tuendemann. If they had been anything like accurate, it would have been an extremely good business. That is why he paid the $85,000, plus the $10,000 fitout, plus $11,000 for files.
From the files that he retained, Mr Yarak has prepared a schedule of bad debts which totals $42,920. He has personally checked every file and made his assessment of the list of bad debtors.[36] I accept from the evidence that this is the level of bad debt suffered by the business over the course of its operation.
[36] Exhibit P5.
I am also satisfied from looking at the financial returns of the family Trust (P C Yarak Pty Ltd trading as PCYarak Family Trust) that the amount of money generated personally by Mr Yarak through the mortgaging of his personal properties at Greenacres was treated as a loan to the Trust. A beneficiary loan account was opened in the name of Mr Yarak which disclosed some minor repayments made to Mr Yarak presumably out of trading. It is not necessary for the sake of this judgment that I separately deal with Mr Yarak and the Trust. The Trust has recorded the loan to it as the funds used for the purchase of the business. I am satisfied from Exhibit P3 tabs 32 and 70 that this treatment is appropriate. It also indicates that the losses suffered (if any) belonged to the Yarak Company, the first plaintiff, and that it properly claims any losses resulting from the transaction.
There are some discrepancies in the financial returns but it is not necessary for me to resolve them here. They relate to the differences in carry-forward figures on the beneficiary loan account within the Trust for its 2013 and 2014 years. No evidence was led as to the reasons why there were differential entries. In any event, that matter is not relevant because the only relevant issue is the purchase of the business. There is no challenge to that fact. Therefore, the proper claimant in relation to any damages award that the Court may see fit to grant is the Yarak Company in its capacity as trustee of the PCYarak Family Trust.
The termination of the licence agreement
Earlier in these reasons I have set out the attempts by Mr Yarak to sell the business conducted by the Yarak Company. They were completely unsuccessful. I find that the lack of success of those attempts is directly attributable to the contumelious disregard of Tuendemann of the interests of the Yarak Company and Mr Yarak and Tuendemann’s decision to deliberately sabotage the possibility of such a sale. I refer to the final refusal of the offer of Mr Freer to purchase the Klemzig business on 13 October 2014.[37] Tuendemann told Mr Freer that after much thought he could not allow him to buy the shop or to look at how the shop runs. The only reason expressed was in the following terms: “You know the reasons why as you are sophisticated investors and not a family concern.”
[37] Exhibit P3 tab 86 p385.
On the evidence before me it is impossible to understand how this could be any basis for Tuendemann to reasonably refuse to engage with Freer (or for that matter previously with Mr Flehan) in the negotiations for the sale of the Klemzig store. It is not appropriate to speculate upon Tuendemann’s intentions, and a submission was made that Tuendemann knew of the financial difficulties being experienced by the Yarak Company and Mr Yarak and may have been hoping to seize the shop without any reimbursement to Yarak. I am not in a position to decide that matter and I put it to one side.
Under the licence agreement,[38] clause 4 governs the term and termination. The licence begins on the commencement date and continues until terminated under clause 4.4 or 4.5. Clause 4.4 allows termination if the licensee commits an event of default. The licensee acknowledges and agrees that the licensor may by written notice terminate the agreement without prejudice to any other rights with other consequential rights in the licensor. Under clause 4.5, the licensee may terminate the agreement at any time by giving the licensor two months’ notice in writing expiring at any time.
[38] Exhibit P3 tab 11 p40.
The terms of the licence agreement do not expressly or by implication exclude the possibility of a termination of the licence by the licensee on the grounds of a breach by the licensor amounting to a repudiation of the contract which may be accepted by the wronged party who in turn may treat the contract as at an end. Whether or not any of the conduct of Tuendemann justifies an assertion of repudiatory breach (and acceptance thereof would lie with the licensee) is a question of fact.

There was an appeal to the High Court. In its decision,[47] the High Court dismissed the appeal from the decision of the Full Federal Court. The High Court compared the operation of s 52 of the Trade Practices Act 1974 (the forerunner to s 18 of the ACL) and the operation of s 9 of the Victorian Fair Trading Act which was in identical terms. At [23] and [24] the High Court held as follows:
The similarities between the text of s 52 of the TP Act and s 9 of the FT Act, and between ss 82(1) and 159(1) will be readily apparent. However, several points should be noted. First, s 159 differs from s 82(1) by omitting any reference to the party whose conduct contravenes the statute and referring only to those involved in the contravention (footnotes omitted). The legislative assumption appears to be that involvement in a contravention includes the actor whose conduct occasioned the contravention. Secondly, at the relevant time the FT Act contained no counterpart to s 75B(1) of the TP Act, so that there was no statutory exegesis of the phrase “any person involved in the contravention” appearing in the damages provision in s 159(1) …
Thirdly, the opening words of s 9(1) are [a] “Person”, whilst those of s 59(1) are [a] Corporation. However, when s 52(1) is read with the additional operation given it by s 6 of the TP Act, it is apparent that, in some circumstances, s 52(1) applies immediately to individuals. On the other hand, in accordance with ordinary principles of construction, and subject to any apparent contrary intention, a body corporate may answer the description of “a person” in s 9(1) of the FT Act. It is not expressly limited to “natural persons”.
[47] Houghton & Anor v Arms (2006) 225 CLR 553.
The High Court held that these provisions disclose a measure of concurrent and overlapping operation of “the normative structure” of the federal and state laws. After reviewing the operation of s 84 of the Trade Practices Act, the High Court held at [40] and [41] as follows:
The appellants are fixed with the findings by the primary judge respecting the conduct in which they engaged, being certain acts and omissions. As indicated earlier in these reasons, these were “in trade and commerce”. Why then are the appellants not persons who contravened the prohibitions imposed by s 9 of the FT Act? ... There is no good reason for treating the text of s 9 any differently and, in particular, for construing the section as if it read: “[a] person, as principal, must not…”.
The main purpose of the FT Act include (s 1(a)) the promotion and encouragement of “fair trade and practices”. As Bell J pointed out in Astvilla Pty Ltd v Director of Consumer Affairs (Vic), and as relied upon by the present respondent, to read down the word “person” in s 9(1) to exclude employees would not promote that object (footnotes omitted).
The High Court concluded, after referring to the decision of Bray CJ in R v Goodall[48] that recognition of the distinct legal identity of a corporation had the consequence that in law the act of an individual might be both a corporate act and the separate act of the actor as an individual.[49] In the result, when full regard is had to the creation to the ACL and the differences between the wording of ss 18, 236 and 237 ACL when compared to ss 52 and 82 Trade Practices Act, the intention is quite plain and the position is not changed from that reached in Houghton v Arms. It means that a person such as the plaintiffs in this matter who suffered loss or damages because of the conduct of another person, Tuendemann in this matter, are entitled to recover the loss or damage by action against him, or for that matter against any person involved in the contravention as that expression is to be understood having regard to the content of s 2 of the ACL. The issue of any person being involved in the contravention does not arise in these circumstances because of the established common law surrounding the operation of s 18 ACL (and its predecessor s 52(1) Trade Practices Act) and s 82(1) Trade Practices Act and s 236(1) ACL.
[48] (1975) 11 SASR 94 100-101.
[49] Ibid [46].
Although there seems little doubt about the issue, it is appropriate that I state that I am satisfied that the representations that were made by Tuendemann were made in trade or commerce. The relationship between the plaintiffs and the defendants were of a trading or commercial character. They were ongoing. They were directed towards profit making and fulfilled the criteria now well recognised in relation to aspects of trade or commerce. It is only necessary to refer again to the decision of the High Court in Houghton v Arms where the Court said at [34] and [35]:
Moreover, in his judgment in Concrete Constructions, Toohey J emphasised that, while in most cases, the focus would be on the nature of the business of the party making the representation, s 52 was not so limited; in particular, the section did not, in terms, refer to the trade or commerce of any particular corporation. Accordingly, statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity (footnotes omitted).
Mr Arms was engaging in trade and commerce under the name "Australian Cellar Door" and by means of the auscellardoor web site. He enlisted WSA to provide services and advice for the purposes of his business. It was the business of WSA to provide such advice and services. It is not to the point that Mr Houghton and Mr Student themselves were not business proprietors or that their activities were an aspect or element of the trade or commerce of WSA (and of Australian Cellar Door) but not of "their" trade or commerce. Mr Houghton and Mr Student nevertheless engaged in conduct in the course of trade or commerce and were thus within the ambit of the FT Act.
I am not in any doubt that the statements made by Tuendemann were designed to encourage the plaintiffs to invest in and purchase the Quick Cash business. The relationship between Tuendemann and the first defendant was much more direct than in Houghton v Arms where the employees were not business proprietors. However, they engaged in conduct in the course of trade or commerce but not of “their” trade or commerce. In this instance, Tuendemann was the guiding hand and mind of the first defendant, was the decision-maker of the first defendant, and made representations on the first defendant in trade or commerce.
Earlier in these reasons, I identified the factual circumstances surrounding the termination by the plaintiffs of the contract with the second defendant. I am mindful that the plaintiffs’ claims are for damages. They do not seek rescission. Plainly enough, rescission would not have been available to the plaintiffs because of their affirmation of the contract and their conduct in the termination of the contract.
Although perhaps trite, it is a principle of long standing that the affirmation of a contract induced by misleading conduct in trade or commerce does not raise a bar to a claim for damages. This was affirmed as long ago as the decision of Pincus J in Myers & Anor v Trans Pacific Pastoral Co Pty Ltd.[50] Pincus J said as follows:
It was further argued on behalf of the respondent that, because they remained in possession of the land for some time and agreed to a variation as to the times for payment, the applicants would be held under the general law to have affirmed the contract and that the same outcome should fairly be held to ensue under the statute. But affirmation is not, under the general law, a defence to a claim for damages; it only affects the right to rescind. In a claim for damages for deceit, the prima facie rule is that the defrauded party is awarded price paid less value. That right survives an affirmation as many reported cases illustrate…
[50] (1986) ATPR, 40-673.
It is also helpful to note that in this decision the applicants were, to an extent, irrationally enthusiastic about their proposal and that they could not satisfy the court that they could survive financially for very long in the enterprise into which they were led by the misleading conduct by the respondent entity. Despite all of that, Pincus J found that the misleading statements brought about the contract to purchase the asset and caused the loss. The applicants were unwise but were not prevented from obtaining their remedy.
The measure of loss outlined by Pincus J in Myers is the standard for the measure of loss: the price paid less value. The price paid by the plaintiffs is understood. It was in the amount of $106,000 comprised of the capital purchase price of $85,000, the $10,000 fit-out (which was completely lost) and the $11,000 paid for the transferred clients. I am satisfied that this is the purchase price. More difficult is the question of the value of that which has been purchased. No valuation evidence was led and I will discuss that matter later in these reasons.
Before considering that matter further, it is necessary first to identify that most, if not all of the representations made to the plaintiffs by Tuendemann were representations as to future matters. I have earlier mentioned the operation of s 4 of the ACL. It reads as follows:
For 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);
(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 representation, unless evidence is adduced to the contrary.
(3) …
(4) …
A future matter is a prediction or projection about anything that is to occur in the future. It is not a projection about a person’s intentions. The person who makes the representation and is alleged to have been guilty of misleading conduct, must adduce evidence to the contrary. That person making the representation carries a statutory evidential burden and it is not enough merely to lead evidence that the representor had reasonable grounds (see s 4(3)(a)). This in turn raises a number of issues that require discussion. An opinion which is identifiable only as an opinion is not necessarily actionable however wrong it might be. That is because there is no misrepresentation in an opinion. An opinion is no more than the expression of a view held by the person stating the opinion. So also in relation to a prediction. There is no presumption to be made that a person expressing a view about a prediction automatically means that the expression of such a prediction is made in circumstances without any basis. A person may have a completely reasonable basis for making a prediction.
It is incumbent upon the person who made the statement with respect to the future matter (and that expression “with respect to” is of the broadest possible scope) to lead some evidence of the reasonable grounds upon which that representation as to the future matter is made. If no evidence is led, then that representation will be taken to be misleading. It is for the court to then accept, or not, that the grounds upon which the representation as to future matters were reasonable. The burden does not fall upon those adducing evidence of the reasonable grounds to prove that they had reasonable grounds. It is therefore necessary to objectively prove the existence of those reasonable grounds. At paragraph 18 of the statement of claim, the plaintiffs squarely raise the liability of the defendants under s 4 of the ACL.
I am satisfied for all the reasons earlier discussed, that the representations as alleged were made, and that those representations were misleading. I refer here to the representations as to future matters, namely:
·A shop at Klemzig would make a minimum of $5000 per week within a short time easily and that would increase over time;
·The business would generate recurrent business of $5000 in circulating loans within eight to nine weeks;
·The plaintiffs would continue to earn not less than $5000 per week less expenses within a matter of eight to nine weeks;
·The defendants would introduce the plaintiffs to the system for trading in gold including a daily cash price;
·Emparo would no longer issue loans; and
·Debt collectors with whom the defendants had a relationship were prepared to purchase debts at 100 per cent of the value of the principal loan and so that there would be no loss of that principal loan.
I find that all of these representations were made by Tuendemann to the plaintiffs and they were relied upon by the plaintiffs in reaching the decision to invest.
It was incumbent upon the defendants to lead evidence as required by s 4(2) and (3) of the ACL. No such evidence has been led. The result is that the defendants have not discharged the evidential burden upon them and the presumption arises which has not been discharged that the representations as to future matters were made without reasonable grounds and that the standard of conduct prescribed under that section has not been fulfilled. As I have also earlier indicated, I am satisfied that these representations were made in trade and commerce and therefore Chapter 5 of the ACL and in particular s 236 has application.
The assessment of damages and orders under s 236 ACL
I have earlier referred to the financial reports of the PCYarak Family Trust of which the first plaintiff was trustee.[51] There was a common feature of these reports. The payment of the salaries and wages reported are referable only to the employment of the single employee Ms Hamblin. The evidence before the Court indicates that Mr Yarak spent at least five to six hours per day in the business but did not draw a salary. In the absence of any salary being drawn by Mr Yarak, the profit and loss statement for the years ended 30 June 2013 and 30 June 2014 disclose a profit to be distributed amongst the beneficiaries of the Trust in the usual way. I have earlier referred to the fact that there was some inconsistency between the accounts prepared by Mr Ashman concerning the operation of the family trust. For example, in the 2014 financial returns, the sum of $9,316 allegedly generated as profit in the 2013 year was treated as retained profits carried forward. However, the figure of $23,756 being the alleged net operating profit as at 30 June 2014 was distributed to a small extent to Mr Yarak and then principally to his partner Carol Keddo and with small amounts to their two children. These distributions are in line with relevant tax principles. However, it does follow that Mr Yarak received a distribution as a beneficiary out of the business in the 2014 year. There is no evidence that he received any other distribution in any other year.
[51] Exhibit P3 tabs 32 and 70.
There is evidence that Mr Yarak received payments in reduction of his loan account to the Trust, however, properly considered, these only have the effect of reducing the debt owed by the Trust to Mr Yarak. They are not income under ordinary concepts. The important feature is that, at least in the 2014 year, there was the generation of some income without attribution of any amount for the salary and wages foregone by Mr Yarak. There are a number of reasons why this treatment would have been used. The first is to disclose to lenders the generation of some income. The second would be to ensure that there was at least some return to the family Trust which had accepted the liability to repay the debt to Mr Yarak which arose as the result of the sale of his Greenacres properties.
There is no detailed evidence on that matter, but these are matters that may be inferred, on the balance of probabilities, from the evidence before the Court. This discussion is directed to the question of what value may be attributed to the business. I consider that this question is answered by having regard only to the events as they transpired during 2015 at which time the licence agreement was terminated first by the plaintiffs and then subsequently by the defendants. The defendants purported to lock out the plaintiffs from the business. The locks were changed on the shop, the fit-out was taken and nothing was heard of the business after that time.
That is largely because of the problems that beset the plaintiffs were overtaken by the problems that beset the defendants because of the loss of their credit provider’s licence and registration. From that time, the business could not have had any value because it could not have gone on trading. This business relied entirely upon the credit provider’s licence held by the defendant company. Once that was withdrawn, there was no business.
It follows that as a matter of ordinary logic, from the outset in 2012/2013 the business had no value because it depended entirely upon the caprice of the defendants as to whether or not the defendants would allow the plaintiffs to continue to trade on their licence. That permission was terminated in 2015. It also follows as a matter of ordinary logic that whatever Mr Yarak and his family may have drawn out of the profit of the business, it still had no value because it could never pay a salary to Mr Yarak. If such a salary (even notionally) was brought to account, there would have been an immediate trading deficiency. The directors of the trustee would have been required to close the business in light of their obligations to the Trust. As a result, it is open to me to form the view that there was no value in the business from the outset; this is the conclusion that is open to me on all the evidence before the Court. And Mr Yarak was forced to sell the Greenacres properties in order to repay the bank debt which he had used to lend money into the Trust to enable it to purchase the business. This confirms that the Trust could not generate enough income to pay Mr Yarak a return sufficient to maintain his borrowings. It also could not repay the loan amount to Mr Yarak. The property owned by Mr Yarak was the security for the borrowing he made to lend money into the Trust. In the usual commercial course, a loan to the Trust should be matched by a sufficient return to cover the borrowing made for such a loan. The inability of the Trust even to do so reaffirms the view I have formed that the asset purchased by the Trust from Tuendemann was worthless, and I so find.
Using a broad axe approach, and recognising the actual figures reported by the PCYarak Family Trust,[52] I remain of the view that in light of the fact that the profit and loss accounts do not accurately record all of the expenses of the business and that there is a degree of artificiality about the distributions to beneficiaries,[53] that there was no value in the business. This is also because I am satisfied on the evidence that the defendant company had not traded for more than about three to four months and therefore there was no basis upon which any representation as to turnover could be made. Therefore to calculate any value to be paid for what had earlier been a business of sorts, was largely illusory.
[52] Exhibit P3 p347.
[53] See Exhibit P3 p347.
I acknowledge that on one view it may be said that by reference to the trading results some allowance should be made for the value of the business of the Trust. However, I am firmly of the view that to attribute a value to that business would be logically unsustainable in the calculation of damages because the business paid no wages to Mr Yarak, it never had any value because trading only occurred as a result of the efforts of Mr Yarak and his staff and, as matters turned out, it could not have gone on trading because of the conduct of Tuendemann. I am therefore satisfied that, consistent with the approach of Pincus J in Myers and the general approach to the calculation of damages, the corporate plaintiff is entitled to an award under s 236 of the ACL against Tuendemann for damages in the amount of $106,000.

I turn finally to the issue of the further damages claim for the sum of $42,190 for bad debts written off. The plaintiffs submit that this claim falls within the general claim for damages directly referable to the entry by the first plaintiff into the licence agreement with the first and second defendant.
In an assessment of damages arising under s 236 ACL, the range of damages may include an assessment of consequential losses. Where there has been an affirmation of the contract and later termination, the fundamental assessment of loss is the difference between the value paid and the value of the asset. Consequential losses associated with trading may be claimable although there are a large number of variables that affect such a calculation. An obvious one is the timing of the closure of the business. In some instances, the business will remain open and trading even after rescission.[54] Other issues, such as causation and remoteness, may also arise.
[54] See Creative’s Landscape Design Centre & Ors v Platz & Ors [1989] FCA 370.
The focus here is upon the so called bad debts written off. There is some background explanation required. In the ordinary course in the accrual or cash accounting methods, on the relevant quarterly or annual balance dates an assessment is made by a trading entity of the collectability of its receivables. The level of receivables is reduced to take into account uncollectable receivables and, as one example, no tax is paid upon those receivables (under the accruals method at year-end balance dates). This assessment is usually made as at the end of the financial period and it must be a genuine assessment of the status of the receivables.
In the Quick Cash business, each of the loans made immediately became a receivable according to its own terms. Each must have been a genuinely collectible debt at the time that the loan was made. Over time that position changed and it appears that by 2014, at least 30 per cent of the sales had become uncollectable receivables.
In the usual course of these methods of accounting, the assessment by directors of bad debts is shown as a charge to the accounts and similarly a write down of assets becomes a charge to the balance sheet. The charge to the profit/loss account of the bad debts, as has occurred in the Yarak Company, has a number of consequences. The first is that a gross profit figure is reduced and so the assessable income (before deduction of overheads) is reduced. There is thus a reduction by the amount of the write off of bad debts of the assessable income of the entity on a dollar for dollar basis. To that extent at least, the Trust is in a different tax position and it follows so also the beneficiaries of the Trust.
A second matter is that after deduction of the expense items and perhaps some overheads, there has been the calculation of net operating profit. I will assume that this is merely the assessable income of the Trust business and that the taxable income (achieved after deducting all overheads from the assessable income) will have been different. On the material before the Court, no specific finding can be made on that topic. What is apparent is that in the 2014 year, a distribution has been made to the beneficiaries of the Trust of the full amount of the operating profit. The principal beneficiary is Ms Carol Keddo, the partner of Mr Yarak. The 2013 net profit was carried forward to the 2014 year. I have already mentioned that there was also reduced indebtedness to the second plaintiff (on behalf of the Trust) on his loan account during the same financial period.
The overall effect is that one way or the other, the Trust has already taken into its accounts the deductibility of the lost receivables. It would in my view be an artifice to now allow those account entries to be reversed and for the net income to be increased. That would mean a greater level of income of the Trust to be distributed amongst the beneficiaries exposing them to a greater tax burden. Although very remote, it may expose the Yarak Company to a penalty assessment as a trustee pursuant to the Income Tax Assessment Act 1936 s 99 on the highest marginal rate of tax.[55] This is important because the distributions in the 2014 year show that the children did not pay any tax, Ms Keddo would not have paid tax on the distribution (assuming that she did not generate any other income) so that the distributions appear deliberately directed to removing a tax burden.
[55] The highest marginal rate of tax for individuals is in the order of 48 per cent (before the Medicare Levy).
On the evidence, it is not currently possible to estimate what the overall effect of such a change in financial position would create. I consider the uncertainty that such a situation creates is yet another reason to refuse this portion of the damages claim of the plaintiffs. The reasons are obvious enough. If there was a removal of the amount of the receivables in full, then the gross profit figure would increase, the net profit would increase and the amount distributable would increase to the beneficiaries. That would mean that a different assessment may need to be made of the nature of the business. If that were the case, the substantive damages claim may need to be reduced to avoid double counting of the bad debts.
In the result, the Yarak Company as the trustee of the Trust, and so the Trust, has dealt with the written off receivables in the way that I have described. The Trust accounts have all been adjusted and prepared on that basis (as they must). No occasion arises for these sums to form part of the plaintiffs damages claim.
I have earlier mentioned the operation of s 137B of the Competition and Consumer Act. I may reduce an award of damages to the extent that I think is just and equitable according to the prescription set out in that Act. I have not identified in the evidence any basis to reduce the award and I consider that none exists. In the absence of the defendants, no such basis was brought to my attention. I make no reduction under the operation of that section.
I therefore confirm that the plaintiffs are entitled to an assessment of damages pursuant to s 236 ACL in the amount of $106,000. I will hear the parties as to consequential orders including as to interest and costs