Lawless v Mackendrick [No 4]

The case of Lawless v Mackendrick [No 4] involved the plaintiff, Lawless, who had purchased a hospitality business from the defendants, Mackendrick, who were the vendors. The dispute arose from the vendors' alleged deceit or negligent misstatements regarding future aspects of the business, particularly its profitability. The matter was heard in the Federal Court of Australia. Lawless sought damages for economic loss, claiming that he had relied on the vendors' statements in deciding to purchase the business. The primary legal issues for the court to determine were whether the vendors or their agent made deceitful or negligent misrepresentations about the business's future profitability, whether such statements were relied upon by Lawless, and if the reliance was a proximate cause of the economic loss suffered. Additionally, the court had to consider whether the liquidator's assignment of the causes of action was valid and whether the failure to conduct due diligence investigations absolved the vendors of liability.

The court examined the vendors' representations closely, noting that they were about future matters rather than existing facts. It held that such representations could potentially give rise to liability for deceit or negligent misstatement if they were made negligently or with intent to deceive. In this case, the court found that the vendors had indeed made misrepresentations regarding the business's future profitability, which were false at the time they were made. The court also determined that Lawless had reasonably relied on these representations in making his decision to purchase the business. Regarding causation, the court concluded that the reliance on the misrepresentations was a proximate cause of the economic loss Lawless experienced due to the business's subsequent failure. The court further addressed the issue of vicarious liability, finding that the vendors' agent could be held liable if the misrepresentations were made within the scope of their employment. Finally, the court upheld the liquidator's assignment of the causes of action, ruling that it was valid and did not prejudice the defendants' rights to a fair trial.

In conclusion, the court found in favour of Lawless, holding the vendors and their agent liable for the deceit and negligent misstatements regarding the business's future profitability. The court awarded Lawless damages for economic loss, which arose from his reliance on the misrepresentations. The court emphasised that the failure to conduct due diligence investigations did not absolve the vendors of liability, as they were responsible for the accuracy of their representations. The final orders included a determination of liability on the part of the vendors and their agent, and a monetary award to Lawless for the economic loss suffered due to the business's failure.