will get what they are paying for. diligence is demonstrated by the 2004 Australian High Court decision in Woolcock Street Investment Pty Limited v CDG Pty Limited [2004] HCA 16. building and offices in Townsville (Complex) from the trustee of a property trust some years after the complex was built. There was no warranty in the sale contract that the complex was free of defects, and there was no assignment of the trustee's right against those responsible for any such defects. About a year after the purchase, the Complex showed signs of structural distress due to subsidence either of the foundations or the soil upon which they were built. CDG was the trustee in 1987 to assist with design of the Complex. There was evidence that CDG had recommended to the trustee that a geotechnical report be obtained as to the load bearing capacity of the structure, and the trustee had refused to incur the expense. It was likely that the subsidence was unlikely to cause any physical harm to anyone and that the only loss was economic. that CDG did not owe a duty to Woolcock. Woolcock's vulnerability to risk and its ability to protect itself from that risk was a key factor in determining whether CDG owed it a duty of care to avoid economic loss. The court found that Woolcock as a commercial investor was able to protect itself from the risk of subsidence. It could for example have obtained an expert's report before purchase or negotiated appropriate neither and this was sufficient to negate any liability. a failure to conduct due diligence or obtain suitable warranties may deny access to other relief. When taken with the provisions of the Competition and Consumer Act 2010 which give effect to proportional liability (rather than simple joint and several liability, and reductions for loss due to a claimant's failure to take reasonable care), it is clear that a buyer in Australia who cuts corners with their due diligence, largely does so at their own risk. diligence exercise should be to ask the prospective purchaser for: advertisements, communications from the agent etc., which have induced His practice includes advising on a variety of issues for businesses including acquisitions and disposals, joint ventures, contracts and employment arrangements, international supply and distributorship arrangements and associated disputes and regulatory issues. Level 18, St. James Centre 111 Elizabeth Street Sydney, Australia 2000 +61 2 9221 1117 Fax codea.com.au |