Mike desires to leave his employment as a mechanic and start his own business. He notices a business, motor mechanic workshop, for sale in his local area.

He attends the business to talk to the customers and also the business owner. One of the customers (Rachel) tells Mike it is a great business and always hard to book your car in for a service as the workshop is always busy. Mike tells Rachel this would be his first business, Rachel's responds by telling Mike this busy would have to be profitable and he should do it.

Mike also telephones his accountant friend Sam and tells him of his intention to buy the workshop. Sam tells Mike the he drives past that workshop each day on his way to work and it is always full of cars. Sam tells Mike that he can not go wrong in acquiring the business and it would definitely be profitable. Sam also advises Mike that before acquiring the business he should obtain a copy of the financials and seek Sam's advice on reviewing financial's performance.

In the heat of the moment Mike puts an offer in on business, doesn't ask for financials and does not undertake any further investigation of the business.

One year later they are on the verge of bankruptcy; the workshop had no customers, the vehicles on site were all owned by the previous owner, the business is not profitable and turnover doesn't even cover cost.

QUESTION

Has Rachel or Sam committed the tort of negligent misstatement? In youranswer focus on whether or not Rachel or Sam owed a duty of care to Mike.

Please use the IRAC structure and refer to the relevant case law.