obligations which were to lead to the execution by 30 September of what was described
in the Term Sheet as a Long Form Agreement.
2. On 16 September 2016 MindChamps communicated to M & W Zaki that it had decided
not to proceed with the purchase under the Term Sheet and gave notice of that decision
to M & W Zaki. MindChamps contends it was induced to enter the Term Sheet by the
misleading deceptive conduct of M & W Zaki and entities and persons related to it and
that it is now entitled to rescind the Term Sheet pursuant to Australian Consumer Law,
ss 237, 242 and 243 (“the ACL”) and have the $500,000 deposit returned to it.
MindChamps further alleges it was entitled to terminate the purchase, because of M & W
Zaki’s failure to satisfy the conditions precedent to the Term Sheet and because of its
breaches of the Term Sheet. MindChamps claims the return of the deposit of $500,000
and recovery of some $16,655.34 in travel expenses it incurred in undertaking due
diligence following entry into the Term Sheet.
3. MindChamps executed the Term Sheet in its then corporate name, as a private company
incorporated in Singapore, MindChamps Preschool (Worldwide) Pte. Limited. In
November 2017 the plaintiff subsequently changed its status to that of a public company,
also altering its name to its present title.
4. The first, second and third defendants executed the Term Sheet as co-vendors. The
fourth and fifth defendants are joined into the proceedings as persons said to have
engaged in misleading and deceptive conduct, including on behalf of the other
defendants. All defendants are members of the Zaki family, or are entities controlled by
family members. The second and third defendants, Childcare Income Protection Pty
Limited as trustee for KZ Trust and Mr Mark Zaki, the co-vendors with M & W Zaki
under the Term Sheet did not otherwise feature significantly in the evidence. Mr Maged
Zaki, the fourth defendant, and his son Kerelos (referred to in evidence as “Carlos”) Zaki,
the fifth defendant together controlled and managed the day-to-day business operations
of the M & W Zaki and played the principal roles on behalf of the sellers in relevant
events. The second defendant is a family company associated with Mr Carlos Zaki. These
reasons refer to defendants as vendors collectively from time to time as M & W Zaki, or
Little Zak’s; and members of the Zaki family are sometimes referred to as “the Zakis”
5. MindChamps alleges the defendants, specifically Mr Maged Zaki and Mr Carlos Zaki
engaged in misleading deceptive conduct during negotiations inducing it to sign the
Term Sheet. It says that these defendants represented: (a) that due diligence documents
required by MindChamps were fully ready so as to allow MindChamps to complete its
due diligence process by 30 September 2016; (b) that the accounts for the childcare
businesses owned by the defendants were audited by PwC or some other external
accountant; (c) that the due diligence “data room” of the defendants was “complete”
prior to MindChamps executing the Term Sheet; and (d) that 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. The last
of these was not ultimately pursued.
6. The defendants contest the misrepresentation case. They allege that the representations
were not made and if they were, when properly construed, they were either not
misleading or were not relied upon.
7. MindChamps also brings a case in contract. It alleges breach of the sellers’ obligations of
due diligence, under Term Sheet, clause 9 and the sellers’ obligations to afford exclusive
negotiations to MindChamps under Term Sheet, clause 12. As to the former,
MindChamps alleges that in breach of clause 9 the sellers did not provide all the
information reasonably required by it by the buyer to enable due diligence
investigations. As to the latter, MindChamps alleges the sellers were continuing to
conduct negotiations with at least one third-party after 1 September 2012 in breach of
clause 12.
8. The defendants contest MindChamps’ breach of contract case. They dispute
MindChamps’ construction of the contract that founds MindChamps case of breach. But
even if MindChamps construction is accepted, the defendants deny both claimed
breaches of contract. As to clause 9, the defendants contend that they did provide all
information reasonably required to enable MindChamps to conduct its diligence
investigations. As to clause 12, they admit having had some contact with other potential
purchases but submit that properly construed it was not a breach of clause 12.
9. The defendants also develop a case that MindChamps decision to terminate the Term
Sheet was not the result of the sellers’ breaches of the Term Sheet. Rather they submit
MindChamps realised that it lacked the finances to complete its next contractual