Question 1 Gigi places the following advertisement in the local paper: "For Sale: Friends Cafe, turnover of HK$3,000,000 per annum, includes resident rented second floor. The cafe is situated in perfect location, on the main tourist route of West Kowloon Cultural District." Friends Cafe is a Canton-style shophouse. Its building designed for joint residential and commercial life. The family shop was downstairs whilst the family resided on the floors above. Henry is interested in purchasing the cafe. He is not interested in the rental income as he will use this space upstairs for additional seating. Henry visits the premises. The cafe is crowded with tourists. He asks Gigi how much of the HK$3,000,000 turnover is down to the cafe business and rentals. Gigi tells him that HK$2,400,000 of the income is derived from the cafe sales, HK$600,000 from rentals. Gigi tells Henry that the cafe with great fittings and equipment, but she does not tell Henry that they will not be included in the contract; instead they are for quick sale separately before passing the property to the buyer. Gigi invites Henry to see her account books which are stored in the store room near washroom. He goes with Gigi but decides he will take her word for it as the store room is very dirty. After signing the contract, Henry finds out that the fittings and equipment for the cafe was sold. So he needs to install a new set of equipment for kitchen before opening. Besides, the planned MTR station has been built. This has caused a substantial fall in the amount of passing trade. Moreover, Henry also finds out that the total turnover of the business had never been more than HK$3,000,000. Advise Henry whether he has any potential claim against Gigi on the grounds of misrepresentation. (Total: 25 marks)