10 minutes.

Selling a Business - The Importance of Full and Frank Disclosure

Selling a Business - The Importance of Full and Frank Disclosure
Key Insights
  • When selling a business, failing to provide due diligence materials that are not only accurate, but also materially complete, can create risk of a misleading and deceptive conduct claim.

  • Vendors looking to sell their business should ensure that sufficient supervisory procedures are in place, especially at the management level, to avoid inadvertently failing to disclose key information to a potential buyer.

  • A corporation may potentially be deemed to have knowledge that a representation is false, even where the person who made the representation did not know it was false.


In January 2022 Justice Elliot of the Victorian Supreme Court handed down a mammoth decision which considered some 145 separate issues in Cargill Australia Ltd v Viterra Malt Pty Ltd (N0. 28) [2022] VSC 13.

The Court found that Viterra and its parent company Glencore had engaged in misleading and deceptive conduct in respect of the sale of its malting business, Joe White, to Cargill for $420 million.

Cargill was successful in establishing its claims that Viterra and Glencore had engaged in misleading and deceptive conduct in breach of section 18 of the Australian Consumer Law, committed the tort of deceit and was also in breach of contract.

In reaching its decision, the Court considered the actions and inactions of employees and representatives of Viterra and Glencore who were involved in the sale of Joe White.

Due Diligence

As part of the sale process, Cargill was provided with an information memorandum and a presentation memorandum. The information provided included financial and operation information in respect of Joe White. Cargill was also able to conduct its own due diligence process, including through the access of a data room.

Factual Findings

After the purchase transaction was finalised, Cargill become aware of many business practices which were not disclosed during the due diligence process, including:

  1. the supply of malt that did not comply with customers’ contractual requirements and specifications;
  2. the issuing of inaccurate certificates of analysis; and
  3. the use of gibberellic acid as an additive which was prohibited by some customers.

(collectively, the Operational Practices)

In essence, the Operational Practices were not disclosed to the potential purchaser during the due diligence process.

Imputation of Knowledge

The Court found that Gary Hughes (Hughes), an executive manager of Viterra Malt and a director and executive manager of Joe White, was an agent of both Viterra and Glencore.

Whilst Hughes had no authority to enter into or dictate the terms of the sale, he was given authority to assist with the sale of the business and was required to provide such assistance at the direction of Viterra and Glencore.

Hughes was involved in the drafting and finalising of both the information memorandum and the presentation memorandum. He also participated in a management presentation. This all formed part of the due diligence process and importantly did not disclose or include any information in respect of the Operational Practices.

The Court found that Hughes was fully aware of the general approach of Joe White to undertake the Operational Practices and that he therefore knew the material provided by Viterra and Glencore as part of the due diligence process was materially incomplete.

In light of the authority conferred in Hughes, the Court found:

“It follows that as a Viterra Ltd employee and Viterra executive, retained and directed in the manner that he was to assist with the sale, Hughes’ state of mind must be attributed to Viterra in determining whether Viterra had knowledge of the Operational Practices before 22 October 2013.”

The Court was also clear that it is not necessary to prove that the person who made the representation knew that it was false. It is sufficient that the person who made the representation had the authority to do so and another person whose knowledge is attributable to the corporation knew the representation was made and knew it was false. In such circumstances, the corporation will be deemed to have knowledge that the representation was false.

Misleading Conduct and Deceit?

The Court found that the failure of Viterra and Glencore to disclose the Operational Practices as part of the due diligence and disclosure process was misleading. It was also found that certain representations were fraudulent, and Viterra was also liable under the tort of deceit.

What Should You Do?

If you intend to sell your business, it is essential that you manage the disclosure process with care. To do anything less can leave you exposed to a claim for damages, the unwinding of the sale or your purchaser walking away from the sale if it has not yet settled.

Where you have concerns about ensuring you comply with your disclosure obligations, you should immediately seek legal advice.

This article in no way constitutes legal advice. It is general in nature and is the opinion of the authors only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.

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Jess Hill


Jess Hill

Daniel Darling-Filby

Senior Associate

Daniel Darling-Filby