Reference no: EM131642472

John and Natalie are a married couple, who wished to purchase a country motel business. They had no previous experience in motels or in running a business of any kind. They attended a seminar at which experts from the motel industry and professional people spoke of its brighter aspects but also warned of the importance of occupancy rate to financial viability. John had worked for many years in the accounts payables department of a large company. Although not a qualified accountant his duties provided him with bookkeeping experience, some understanding of figure work and costing. Natalie previously worked as a receptionist for some nine or more years. They had available $40,000 together with the proceeds of sale of their family home.

After an initial contact over some other proposition which did not come to anything, Mrs Wentworth offered John and Natalie, on behalf of a Mr Holgate (the seller) the business at Burradoone for $100,000 of which only $15,000 was for goodwill.

Early in their encounter Mrs Wentworth told John and Natalie that she had owned motels herself and had a lot of experience in the motel business and that she would find them a motel. She told them that she had sold a lot of motels, had not sold a bad one, and could help them by recommending a finance broker. John told her that he would also be "relying on an accountant's opinion".

The motel at Burradoone comprised 15 units which were newly built by the seller, together with a shop. The seller had operated the business for a mere 12 weeks. The reason for the sale was that Mr Holgate was recently diagnosed with cancer and was severely affected by his illness.

Mr Holgate owned the land and had built the shop and motel encouraged by the demand expressed to him by tourists. However, at the time of the sale of the business it was operating unprofitably. All the figures were disclosed to John and Natalie.

John and Natalie were told and knew that the business had to be built up to be a success.

In the promotional material disseminated by John and Natalie after taking possession, Burradoone was described as "offering activities such as bowls, tennis, golf, a winery and day trips to historic and quaint places. Burradoone is a quiet little rural town nestled on the arm of Lake Edon amidst some of New South Wales' most beautiful countryside. Lake Edon offers a sporting paradise of fishing, skiing, sailing and swimming. The beautiful countryside provides scenic drives, horse riding and bush walking."

The area had all these attractions or at least might be thought to have had them. The trouble was that at the time the business was purchased there was very little water in Lake Edon.

Before signing the contract Mrs Wentworth told John and Natalie that buying the business was a once in a lifetime opportunity, that Mr Holgate would not be selling it save for his ill health, that the business had year-round trade because December to February was a holiday season, April was Easter time, then there were school holidays. She told them the business had great potential, that if she was not otherwise currently engaged she would consider buying it herself, that it was a bargain basement price and that once you get going it will be a gold mine.

Unfortunately within six months John and Natalie cannot afford to pay the outgoings let alone make some money to live on.

Advise John and Natalie fully of their chances of pursuing negligence claims only against Mrs Wentworth.