A FEDERAL Court judgement handed down last week serves as a reminder for those buying an established business to ensure all relevant financial information is properly considered.
A FEDERAL Court judgement handed down last week serves as a reminder for those buying an established business to ensure all relevant financial information is properly considered.
The courtroom saga between the original and final owners of now-defunct computer reseller, Abacus Computers and Technology, stretched out for more than two years and was finally dismissed by Justice Lander one week ago.
Abacus’ original owner and former chief executive, Glenn Ford, sold his 26-year-old company’s six retail sites and trading name to Abdus Salam Aziz of Sanguine Technology in April 2007 for an undisclosed sum.
Mr Ford, who runs rental company Abacus Rent IT and Abacus Calculators, believed that Mr Aziz, who had previously owned a Canning Vale camping retail business, albeit with a background in IT, may have been successful if he had listened to the experienced Abacus staff during the first six months of trading instead of doing things his own way.
‘‘It’s very sad to see 26 years of your work go down the gurgler and see someone else unfortunately suffer financial loss,’’ Mr Ford said.
He said Mr Aziz only launched the case after an earlier lawsuit had been launched by Mr Ford seeking more than $300,000 in monies owed from the purchase of the business.
According to the judgement, Mr Aziz accused Mr Ford of misleading or deceptive conduct, which contravened the Trade Practices Act when providing financial information about Abacus’ retail business.
“The dispute relates to the extent of information given by the respondents (Mr Ford) to the applicants (Mr Aziz) on 9, 13 and 15 March and 26 April 2007,” the judgement read.
Initial information provided to Mr Aziz on March 9 included Abacus’ projected sales figures for the first four months of 2007, with a profit-loss statement for the first half of FY06 provided on March 13.
The parties entered into an agreement for the purchase of the business on April 17, with settlement taking place around May 7.
However, the projected sales figures from January to April were not achieved in actual sales.
For example, sales for March were projected to be above $800,000 but actual sales for the month totalled $399,000.
Mr Aziz claimed that Mr Ford did not disclose the differences between the projected and actual sales figures despite having this information at his disposal.
However, the judgement stated that Mr Ford passed on this information to Mr Aziz on or around March 21 via their individual accountants, which was then supplemented on April 26 by further sales figures.
“The respondents (Mr Ford) deny that any of the representations which were made were such as to give rise to misleading and deceptive conduct,” the judgement stated.
Beyond having his claim dismissed, last week's judgement also resulted in Mr Aziz being required to pay more than $414,000, plus court costs, as part of the cross-claim lodged by Mr Ford stemming from the outstanding payment for the business.
