Goodwill for shop ‘grossly inflated’

Press, Volume CXV, Issue 33925, 19 August 1975, Page 12

Goodwill for shop ‘grossly inflated’

A young married couple who bought a suburban grocery and later went bankrupt had paid a “grossly inflated’’ amount for the goodwill, the Deputy Official Assignee (Mr L. Anderson) said.

He told Anthony James Kleehammer and Sonia Loriraine Kleehammer that they ■should have sought professional advice and checked the financial statements of .he business before they bought the shorn at 209 Bower Avenue, from Complete Grocers, Ltd. The Kleehammers were adjudged bankrupt on their own petition on July 25. Their partnership has 10 creditors, with liabilities totalling $7872.22. Assets amount to $lO5. Mr Kleehammer told the i first meeting of his creditors yesterday that he and his wife bought the grocery in June last year for $10,274 (goodwill $3OOO, stock $3300, ahd plant $3974). He said that he and his wife had come from Australia and had put their total savings of $2OOO info the shop as a deposit. ;The balance was to be paid off to Complete Grocers, Ltd, at a rate of $lOO a week at 10 per cent-interest. Mr Kleehammer said that when he bought the shop the vendors had told him the weekly turnover was between $lOOO and $llOO. But during the year that he operated the shop, the highest turnover achieved at any time was only $9OO per week. Mr Kleehammer said that when he bought the shop he thought an independent valuation had been made of

| the premises and plant. Il was only after he had mad< the purchase that he fount (the valuation he had beer I sent had been made by Com Iplete,Grocers, Ltd. He had tried to get an. (other valuation but “things got a bit rough for a while and it was left as it was.” Mr Kleehammer said that : a valuer for Foodstuffs, Ltd, (had told him after the purlchase that the plant in the (shop was worth only about half of what he had paid for lit. He said that he realised lat the beginning of this year I that the weekly turnover in I the shop was continuing to i drop and that he would be (forced to sell the business. He could find no buyer willing to pay any goodwill. The shop was eventually .sold in June for $3600 (the estimated value of stock and plant only) to Festival Foods, Ltd. The Kleehammers gave as reasons for the failure a lack of capital, a lack of management experience, effects of inflation and the loss from the sale of the shop.