A recent Federal Court decision concerning the sale of a
licensed hotel illustrates some of the difficulties a nominee
purchaser may confront when they try to sue on the contract.
In Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty
Ltd1 the Court determined, as a separate issue
before trial, whether a nominee under a contract for the sale of a
licensed hotel business could sue the vendor. The nominee claimed
the vendor had breached certain warranties relating to the
financial performance of the business.
The Court was asked to decide whether the contract of sale
permitted the appointment of a substitute purchaser for, or in
addition to, the named purchaser, or whether the nomination was no
more than a direction to the vendor to transfer the business to the
A finding that the former applied would allow the nominated
purchaser to sue, while a finding that the latter applied would
Not surprisingly, the case was decided by reference to the
particular facts concerning the formation and terms of the
While the court found the nomination form to be ambiguous to the
extent that it failed to make clear whether the nominee was to be a
substitute purchaser or whether the nominee was simply taking a
transfer of the business, it was held that, when read in the
context of the remainder of the nomination form, as well as the
provisions of the sale agreement and guarantee, it was clear that
the nominee was intended to be a substitute purchaser with all the
rights and obligations attached to that position.
In any event, even if a nominee is unable to sue on a contract,
it may be able to sue the vendor alleging misleading and deceptive
conduct in connection with the supply of financial information.
While this will ultimately depend on the facts of the particular
case, it is not uncommon for a misleading and deceptive conduct
allegation to be made at the same time as a breach of warranty
The decision in Avzur is a timely reminder of the need
to take care when considering nomination clauses. Nomination
clauses may be considered less significant, and perhaps mechanical,
or may be omitted altogether by a purchaser intending to nominate
at general law, but doing so raises the risk of the nominee being
prevented from suing on the contract.
In difficult economic times, it is no coincidence that claims
for breach of financial warranties come to the fore, and the
nominated purchaser should ensure it can make such a claim on a
contractual basis by paying proper attention to the nomination
1.  FCA 701 (30 June 2009).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The article discusses the legislative requirements and then provides some comments on common mistakes made by caveators.
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