Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Seller Beware of Litigation; Misrepresenting a Business Can Have Serious Repercussions

Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Seller Beware of Litigation; Misrepresenting a Business Can Have Serious Repercussions

Article excerpt

Byline: Brendon Crabtree Licensee of Coastal Business Brokers

BUSINESS owners need to be much more careful about the decisions they make when it comes to selling their business as litigation in this area increases.

Sellers are generally the first target of dissatisfied buyers. Agencies are the next. Often inexperienced or new players to this industry will inadvertently misrepresent a business through a lack of historical data, knowledge or experience that would come from years in this industry and the area.

If a buyer buys a business that has been misrepresented by the seller or the broker they may have a legal recourse.

Case Study 1

Mr and Mrs Hill bought a hotel from Tooth & Co Limited in 1991 for $1,350,000 and at that time the average takings were represented at $18,450 per week.

Mr and Mrs Hill alleged that the information they were given was incorrect leading them to reasonably assume that average weekly takings of $18,450 were current and sustainable.

Mr and Mrs Hill were not able to keep up the payments on the loan they had to buy the hotel and subsequently sold it for $1,200,000 in 1994.

Mr and Mrs Hill took Tooth & Co Limited to court seeking damages for misleading and deceptive conduct.

The court accepted that Mr and Mrs Hill had been given incorrect information and, had they been given correct information, they would not have bought the hotel. They were awarded damages of $400,000 plus costs.

Dennis Ronald Hill & Anor v Tooth & Co Ltd & Ors (1998) ATPR 41-649

Case Study 2

Mr Nielsen bought a motel from Hempston Holdings Pty Ltd for $345,000. The motel ran at a loss for about a year after which time Mr Nielsen took Hempston to court seeking damages for misleading or deceptive conduct.

He alleged that the company had misled him, claiming an occupancy rate of 80 to 89% when the true rate was 30%.

Hempston argued that Mr Nielsen could have deduced the occupancy rate by inspecting the motel's books and seeking further information.

However, the court accepted that the company had given a false occupancy rate and the purchaser didn't have to pursue the matter and check out the figures. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.