MindChamps Preschool Limited v M & W Zaki Pty Limited ATF the Zaki Group Trust & Ors [2022] NSWSC 881

Supreme Court New South Wales

Medium Neutral Citation: MindChamps Preschool Limited v M & W Zaki Pty Limited ATF the Zaki Group Trust & Ors [2022] NSWSC 881 Hearing dates: 12, 13, 14, 15, 16, 29 & 30 July and 11 August 2021 Date of orders: 1 July 2022 Decision date: 01 July 2022 Jurisdiction: Equity Before: Slattery J Decision: Misleading and deceptive conduct case dismissed. Plaintiff successful on case in contract. Order for the return of the deposit of $500,000. Directions made for the calculation of interest and determination of issues of costs. Catchwords: MISLEADING AND DECEPTIVE CONDUCT – plaintiff executes an agreement on 1 September 2016 for the acquisition of nine childcare centres from the first, second and third defendants – plaintiff alleges the fourth and fifth defendants engaged in misleading and deceptive conduct on behalf of themselves and other defendants inducing the plaintiff to execute the agreement – plaintiff terminates agreement and seeks recovery of the deposit – whether the fourth and fifth defendants represented to the plaintiff before execution of the agreement that a) due diligence documents required by the plaintiff were fully ready to allow the plaintiff to complete due diligence by 30 September 2016 (b) the accounts for the childcare businesses were audited by PwC (c) the due diligence 'data room' of the defendants was complete; and (d) there was another potential buyer of the childcare centres who had already commenced the due diligence process, and who was willing to pay a non-refundable deposit of AUD$1 million – whether any representations made by the fourth and fifth defendants were misleading – whether the plaintiff relied upon any representations made – what loss was caused by any misleading deceptive conduct of the defendants and what relief should be given, including return of the deposit. Alternatively, whether the circumstances occasion relief for negligent misrepresentation. CONTRACT – breach of contract – interpretation of contract terms – agreement for the acquisition of nine childcare centres – conditions precedent – deposit held in escrow – provisions of the agreement requiring due diligence before entry into a long form agreement on 30 September 2016 – a term of the agreement provides for the return of the deposit, if the sellers breached their obligations with respect to the due diligence process, or if the seller breaches certain obligations in relation to exclusive dealing with the plaintiff – whether the sellers have breached either their due diligence process obligations or their exclusivity obligations under the agreement – whether the sellers are required to the return of the deposit. Legislation Cited: Australian Consumer Law Civil Procedure Act 2005, s 100 Cases Cited: Strike Australia Pty Ltd v Data Based Corporate Pty Ltd (2019) 19 BPR 39,621; [2019] NSWCA 205 Category: Principal judgment Parties: Plaintiff: MindChamps Preschool (Worldwide) Pty Ltd First Defendant: M & W Zaki Pty Ltd ATF the Zaki Group Trust ABN 99233987815 Second Defendant: Child Care Income Protection Pty Ltd ATF The KZ Trust ABN 94358741310 Third Defendant: Mark Zaki Fourth Defendant: Maged Zaki Fifth Defendant: Kerelos Zaki Representation: Counsel: Plaintiff: M. Izzo SC; B. Hancock First to Fifth Defendants: R. Newlinds SC; A. Horvath