Selling a business in Queensland can be a complex and emotional process. It is important for both the buyer and the seller to understand the legal implications of engaging in misleading or deceptive conduct surrounding business sale contracts, particularly when those contracts contain clauses, such as those that:
- require sellers to assure the buyers that trading figures relating to the businesses are true and correct in every particular;
- require sellers to provide to the buyer all books and records comprising the financial accounts of the business including all balance sheets, account ledgers, BAS statements, income tax returns that relate to the business and all such other records and information as the buyer may reasonably require for the business;
- relate to the service periods of each employee; and
- have due diligence clauses and prescribed timing for undertaking due diligence.
Under the Australian Consumer Law (“the ACL”) (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth)), which applies in Queensland, a person cannot make false or misleading statements, or to withhold important information, in order to induce someone to enter into a transaction. This applies to the sale of a business, just as it would to any other type of consumer transaction. The relevant sections of the ACL which prohibit misleading or deceptive conduct and false or misleading representations are sections 18 and 29 respectively.
To have a claim for misleading or deceptive conduct under the ACL, the following elements must be satisfied:
- The seller made a representation (either by words or conduct);
- The representation was made in trade or commerce;
- The representation was false or misleading (or likely to mislead or deceive); and
- The seller knew, or was reckless or negligent as to whether, the representation was false or misleading.
If a buyer suspects that the seller has engaged in misleading or deceptive conduct, they should document all of the information provided by the seller (or their representatives), keep all documents that were provided by the seller (or their representatives) in the negotiation phase of the sale, recall the details of any representations made by the seller (or their representatives), and seek legal advice.
Where a buyer successfully establishes it has suffered loss or damage as a result of the misleading or deceptive conduct, the remedies available to them may include, amongst other things:
- A declaration that the seller has engaged in misleading or deceptive conduct;
- An order declaring the sale contract void pursuant to sections 236, 237 and 243 of the ACL; and
- Damages against the seller for its contraventions of the ACL pursuant to section 236 of the ACL.
Rose Litigation Lawyers reguarly act for both buyers and sellers in these circumstances. We can help to review a Contract, compare the financial information and the relevant correspondence provided against the true circumstances to provide advice with respect to a possible contravention of the ACL.
If you suspect that this relates to you or your business and want advice on your possible rights, contact us today.