LEA Child Care Services v Development Learning Centre Rainbow Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

COMMERCIAL LIST

S ECI 2019 04057

LEA CHILDCARE SERVICES	Plaintiff
v
DEVELOPMENT LEARNING CENTRE RAINBOW PTY LTD	Defendant

---

JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	13–15, 23 July 2020
DATE OF JUDGMENT:	30 November 2020
CASE MAY BE CITED AS:	LEA Child Care Services v Development Learning Centre Rainbow Pty Ltd
MEDIUM NEUTRAL CITATION:	[2020] VSC 787

---

CONTRACT – Construction – Sale of business agreement – Standard form agreement amended – Occupancy rate of childcare business – Material Adverse Change alleged – Obligation to disclose anticipated drop in occupancy rate after completion – Conditions precedent – Due diligence period – Breach of warranties alleged – Availability of remedies specified in agreement – Claims dismissed.

CONSUMER LAW – Misleading and deceptive conduct – Alleged misrepresentation by silence – Sophisticated parties – Whether reasonable expectation of disclosure – Conduct not misleading in context of contract – Claim for misleading conduct dismissed – Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, Donne Place Pty Ltd v Conan Pty Ltd [2005] QCA 481 applied – Concrete Construction Group Pty Ltd v Litevale Pty Ltd (2002) 170 FLR 290 cited – Competition and Consumer Act 2010 (Cth), Schedule 2, Australian Consumer Law, s 18.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr E Gisonda	Colin Biggers & Paisley
For the Defendant	Mr J Tomlinson	SBA Legal Pty Ltd

TABLE OF CONTENTS

A.. Introduction.................................................................................................................................. 1

B.. The Contract.................................................................................................................................. 8

C.. The Claims by LEA.................................................................................................................... 18

D.. The Witnesses............................................................................................................................. 23

E... The Contract and Warranty claims: Relevant Principles................................................... 41

F... The Primary Claim by LEA: Was there a Material Adverse Change?............................. 44

G.. Claims concerning failure to provide ‘the information’. What constitutes ‘the information’........................................................................................................................................................ 55

H.. The First failure to provide ‘the information’ Claim: Clause 4.1(d)................................. 57

I.... Construction of clause 4.1(d).................................................................................................... 58

J.... Due Diligence Information...................................................................................................... 66

K.. The Second information claim: Breach of Warranty 2.1 and Clause 13.1 between 4 and 10 August 2017................................................................................................................................. 70

L... The third information claim: breach of warranty 2.1: the provision of the Deed Poll. 73

M. The Misleading and Deceptive Conduct Claims................................................................. 77

N.. LEA’s contentions...................................................................................................................... 83

O.. The Rainbow Parties’ contentions.......................................................................................... 84

P... Consideration of the s 18 claim............................................................................................... 87

Q.. Damages....................................................................................................................................... 96

R.. Disposition.................................................................................................................................. 97

ANNEXURE A.................................................................................................................................. 98

ANNEXURE B................................................................................................................................. 100

HIS HONOUR:

A.Introduction

By contract of sale dated 9 June 2017,[1] LEA Childcare Services Pty Ltd (‘LEA’), a wholly owned subsidiary of Think Childcare Ltd (‘THINK’), purchased the childcare centre business conducted by Development Learning Centre Rainbow Pty Ltd (‘Rainbow’) at 359-361 Chesterville Road, Bentleigh East (‘Business’) for the sum of $3.4 million (‘Contract’). Completion of the Contract occurred on 11 August 2017 (‘Completion’). The Contract is complex, it comprises 39 pages and 6 annexures. Relevant clauses of the Contract and definitions are set out in section B.
[1]CB 354-454.

LEA, the purchaser pursuant to the Contract, is the plaintiff. The vendor of the business, Rainbow, is the first defendant. Nataliya Shulina, the sole director of Rainbow and the majority shareholder of the shares in Shulin Family Pty Ltd, the parent company of Rainbow, is the second defendant. Her husband, Oleg Shulin, the holder of the remaining shares in Shulin Family Pty Ltd, is the third defendant.

The Contract included a large number of conditions precedent to Completion that unless satisfied or waived by LEA, entitled it to walk away from the Contract. One condition precedent was the completion by LEA of certain due diligence investigations to its absolute satisfaction by the ‘Due Diligence Completion Date’ (clause 3.1(g)). Another condition precedent was that there be no ’Material Adverse Change’, being no more than a 7.5% decrease in the occupancy rate of the Business between the Agreement Date and the ’Completion Date’(clause 3.1(f)).

The Contract included warranties which Rainbow, as the seller, represented and warranted to be true at the Agreement Date, on each day up to Completion and as at Completion (clause 13.1) (‘Warranties’). Rainbow was required to provide written notice at Completion that the Warranties were true and correct as at the Completion Date (clause 5.3(a)(ii)). It was also required to provide a Deed of Restraint (clause 5.3(a)(vii)) executed by Nataliya Shulina and Oleg Shulin (identified in the Deed of Restraint as ‘Key Persons’) (together with Rainbow, ‘the Rainbow Parties’).

At the time of the Contract Rainbow had been operating the Business for approximately nine years. For approximately eight years, Rainbow had also operated a childcare centre at 39 Isabella Street, Moorabbin, approximately 2.5 kilometres from the Business (‘Moorabbin Business’).[2]
[2]The Moorabbin Business is defined in clause 1.1 of the Contract as the ‘Other Business’.

The Deed of Restraint operated as a qualified restraint of trade, providing that, for a period of two years Rainbow and the Key Persons could not operate any business that would compete with the Business, other than the Moorabbin Business. It permitted them to accept the business of any current or former customer of the Business at the Moorabbin Business after Completion, and to offer employment to an Employee of the Business who did not accept an offer of employment by LEA in accordance with the Contract.

The provision of childcare at the Business was subject to statutory requirements limiting the maximum number of children who could attend the centre to 82 fee paying places (sessions) per day,[3] so that from week to week the maximum capacity of the centre was 410 sessions. The regulatory regime provided that if a child ‘transferred’ his or her enrolment to a new centre operator, such as upon sale of the Business to LEA, with the child continuing to attend that centre, new individual enrolments forms needed to be completed for each child.
[3]Education and Care Services National Law Act 2010 (Vic) s 51(4A).

The most critical financial metric for a childcare centre is its utilisation rate. The utilisation rate represents the number of booked fee-paying places compared with the maximum legally permitted capacity of the centre. In the two years leading up to execution of the Contract, the utilisation rate for the Business averaged 70%.[4] In the last week prior to the Contract being signed, the week ending 2 June 2017, the utilisation rate was 70%.[5]
[4]CB 418, 421–CB454.
[5]CB 454.

On Friday 4 August 2017 (one week before Completion), the pending sale was announced (for the first time) via an email to families and staff of the Business. The utilisation rate for that week was 69.27% (or 284/410 sessions).[6] The utilisation rate for the week leading up to Completion being the week ending on 11 August 2017 was 69.02% (or 283/410 sessions).[7]
[6]CB 1139.
[7]CB 1149.

At no time prior to Completion did the utilisation rates drop in any material respect below the 70% utilisation rate as at 2 June 2017. However, in the week immediately following Completion, there was a substantial reduction in the utilisation rate at the Business. In that week the utilisation rate at the Business was only 47.6%.[8]
[8]Transcript 51.31; CB 110.

Events that took place between Friday 4 August 2017, the Friday prior to Completion and Monday 14 August 2017, the Monday after Completion, and the decrease in the utilisation rate that occurred on and from 14 August 2017 are the matters that have given rise to this litigation.

At 10.54am on Friday 4 August 2017, Mr Shulin sent an email to the families of children enrolled at the Business informing them of the sale of the business to LEA (the ‘Announcement Email’):

Dear Parents and Families,
We would like to thank you for supporting our Early Learning Centre throughout the 9 years of operation. It was a great privilege to have your children under our care throughout all this ,me. With great joy, we have supported them along their early childhood journey and watched them grow and learn new and exciting things day by day.
With a heavy heart, we regret to inform you that the DLC Rainbow Bentleigh East campus will no longer run under the DLC Rainbow group. The centre will run under the new management from Monday the 14th of August 2017 …and we believe, will continue to provide our children and families the high-quality service and care. The funds held at current Bond accounts of families that are enrolled to Bentleigh East campus will be refunded to you before this date. We will remain running and operating our Moorabbin campus as usual, and therefore no changes will affect families at DLC Rainbow, Moorabbin.
We would like to say a big thank you to our parents and families at Rainbow for all your support throughout your child’s journey with us, and for allowing us to assist your children in their journey to big world ahead.
We are sure that each child will reach their full potential and achieve great things in life!
If would like more information, you are welcome to contact Oleg Shulin – Financial director DLC Rainbow.
Oleg will be available at Bentleigh east campus office, from 4th to 11th August.

The Announcement Email enclosed a letter from Ms Mawer, then the National Operations Manager of THINK, that read in part as follows:

We are pleased to announce that we will be the new owner and operator of Developmental Learning Centre RAINBOW ‐ Bentleigh East as of close of business on the 11 of August 2017. The centre name will change after settlement occurs and it will be known as Chesterville Road Early Learning & Kinder.
First, a brief introduction to us – Think Childcare Limited is an experienced operator with a passion for quality childcare. As a group, we currently own /operate 53 centres across 4 States…
We have some exciting new ideas for the centre…
We can confirm that Erin Sharp will be the appointed Centre Director to ensure a smooth transition
... Erin has been with the group for nearly 2 years and comes with a great amount of Knowledge and plenty of passion in the Early Childhood sector. Kim Horsburgh will be the Area Manager to support the centre. A new enrolment pack will need to be filled out for each child that attends the centre. We appreciate there is a lot of information to fill out however due to licensing requirements we need these completed ASAP and returned to the centre…
In regards to payment of fees we have completed all the requirement documentation for the Department of Education; however, the approval may take a few weeks after the settlement day. We require you to continue to pay weekly/ fortnightly (as per what you would normally have done) so that you do not fall behind your payments. Erin will be able to assist you with your fee estimate.
In the meantime all debts incurred with, credits you have or bonds you have paid to Developmental Learning Centre Rainbow Pty Ltd on or prior to the settlement date of our purchase will be followed up by and/or refunded to you direct from Developmental Learning Centre Rainbow Pty Ltd.

Within a matter of hours of the Announcement Email families of children at the Business began to send responses by email to Rainbow expressing their desire and intention to move their children to the Moorabbin Business.[9] By the end of Friday 4 August 2017, the families of eight children had made such requests.[10] By the end of Sunday 6 August 2017, the total number of children whose families had made known to Mr Shulin their intention to transfer to the Moorabbin Business by sending an email had risen to 11.[11] The children of those families accounted for 44 sessions out of 284 or 15.5% of current enrolments at the Business.[12]
[9]See, for example, email from Patricia Lim of 4 August 2017, CB 1590; email from Kate L of 4 August 2017, CB 1604; emails from Natasha L of 4 August, CB 1582–86; email from Michael Gladshtein of 5 August 2017, CB 1552.
[10]Plaintiff, Amended Statement of Claim, 3 June 2020 (‘ASC’) [13].
[11]Ibid.
[12]Transcript 29.2–17; CB 1149.

By Completion on Friday, 11 August 2017, the number of children who had notified their intention to transfer to Moorabbin by email to Mr Shulin translated to 60 sessions per week or 21.2% of enrolments.[13] In addition Rainbow was informed (on 9 August) that a further child was leaving the centre.[14]
[13] That number and percentage does not include Andrey George’s enrolment. His mother, Ailsa Motorina, emailed Rainbow on Thursday 10 August to say that she was thinking about transferring George, and asked Mr Shulin to call her to discuss. On Sunday 13 August she confirmed the transfer request. See CB 1542-1546. George accounted for 2 sessions per week.
[14]CB 1651–2.

Ms Mawer attended the Business on Wednesday 9 August 2017. She spoke to Mr Shulin. She met with various employees and made offers of employment to those who were present.

LEA was not provided with a copy of the Announcement Email sent on 4 August 2017. It was not told of the invitation in the email for families to contact Mr Shulin at the Business during the week commencing 7 August 2017. It was not told of the responses by families to the Announcement Email. It was not informed of the emails forwarded by families to Rainbow on Friday 4 August 2017, over the weekend ending 6 August 2017 or in the week ending Friday 11 August 2017. It was not informed of responses by Rainbow and by Mr Shulin to emails sent by families or of conversations that took place between Mr Shulin and families of children at the Business between 4 and 11 August 2017. Ms Mawer was not told of such of these developments as had taken place prior to her attending the centre on 9 August 2017 and meeting with Mr Shulin.[15]
[15]Plaintiff, First Witness Statement of Amanda Mawer dated 18 February 2020, [8]–[11].

LEA was not told of these developments at any time prior to Completion. None of those matters were disclosed at Completion when Ms Shulina provided notice pursuant to clause 5.3 (a)(vii) of the Contract on behalf of Rainbow, in the form of a Deed Poll that confirmed the accuracy of the Warranties.[16]
[16]CB 1141.

Less than 12 hours after Completion, Mr Shulin was very busy. Between about 1.49am and 2.25am on Saturday 12 August 2017, Mr Shulin sent emails to all families who had expressed an intention by email to Rainbow, prior to Completion, to move their children to Moorabbin. The emails sent in the middle of the night invited families to confirm their booking preferences.[17] As each family sent a reply over the weekend, Mr Shulin sent emails that confirmed enrolment of the child or children in question at Moorabbin to commence in the week beginning 14 August 2017.[18] Arrangements were made by Mr and Mrs Shulin over the weekend of 12 and 13 August for a further child whose family had been on holidays in the week commencing 4 August 2017 to transfer from the Business, to begin attending the Moorabbin Business in the week commencing 14 August 2017.[19]
[17]CB 1325–1443.
[18]Ibid.
[19]CB 1639–43.

Details of the communications between Rainbow and the families in question between 4 and 14 August 2017 and the number of child places impacted are summarised in tables prepared on behalf of LEA. A copy of the tables are located in Annexures A and B to these reasons.

None of the children whose families had made arrangements with Rainbow for them to move to the Moorabbin Business attended the Business in the week beginning 14 August 2017. In the month before Completion, the 16 children who moved to Moorabbin accounted for between 55 and 62 sessions per week at the Business.[20] Based on the historic utilisation rate of 70% these children represented around 27-31% of actual utilisation.
[20]Based on the Plaintiff’s Opening Schedule, the children accounted for 55 sessions in the week of 17 July, and 62 sessions in the week commencing 7 August.

LEA claims damages against Rainbow; first, for breach of Contract; and second, for breach of certain express Warranties in the Contract. In addition, LEA alleges that Rainbow engaged in misleading or deceptive conduct by remaining silent about material facts and matters of which it is said Rainbow was aware both when the meeting took place with Ms Mawer on 9 August 2017 and by the provision of the Deed Poll.

The contract case for LEA both as pleaded and as conducted at trial was that if LEA had been made aware of ‘the information’, as discussed in section G below, concerning communications between Mr Shulin and Rainbow and families with children enrolled at the Business between 4 and 10 August 2017 about moving those children to the Moorabbin Business, as it says it ought to have been, it would have terminated or would not have completed the Contract.

Separately it was alleged by LEA that each of Rainbow, Ms Shulina and Mr Shulin are primarily liable for misleading and deceptive conduct. Alternatively, that Ms Shulina and Mr Shulin are liable as participants in misleading and deceptive conduct engaged in by Rainbow. The case against each for breach of s 18 of the Australian Consumer Law (ACL) is advanced on the basis that if there had not been misleading and deceptive conduct by them, or to which they were relevantly a party, LEA would have terminated or would not have completed the Contract.[21]
[21]ASC, [37]-[38].

LEA seeks $2,155,000 in damages, being the difference between the purchase price it paid for the Business ($3,400,000) and what it says is the value of what it acquired based on post completion utilisation rates ($1,245,000). In relation to damages, LEA relies upon the expert report and evidence of Mr Hockley, a forensic accountant.

Rainbow denies breach of contract. It denies failure to comply with the express Warranties. The Rainbow Parties deny the allegations of misleading and deceptive conduct.

B. The Contract

The Contract is dated 9 June 2017. That date is defined as the ‘Agreement Date’. The schedules to the Contract include:

(a) schedule one, setting out certain defined items referred to in the Contract, such as the Initial Purchase Price;

(b) schedule two, which sets out the Warranties issued by the Vendor;

(c) schedule four, setting out the Deed of Restraint referred to above; and

(d) schedule six, containing the Due Diligence Material. This includes schedule 6a, which encloses two questionnaires prepared by LEA, titled ‘Due Diligence Enquiries’, completed by Rainbow and dated 22 May 2017 and 9 June 2017.[22]

[22]The completed schedules were provided as enclosures to an email by SBA Law to the in-house lawyer at THINK by email at 3.58pm on 9 June 2017 (CB 1117). The completed schedules replaced earlier draft responses to both schedules provided by SBA on behalf of Rainbow on 23 May 2020 (CB 1102).

Amongst the defined terms in clause 1.1 are the following:

Business means the child care business carried on by the Seller from the Premises under the Business Name, accommodating a minimum of the Child Placements.
Business Assets means the assets used in or forming part of the Business ad includes, but is not limited to:
(a)the Goodwill
(b)the Intellectual Property;
(c) the Business Records;
(d) the Plant and Equipment;
(e)all Authorisations required to carry on the Business;
(f)the Stock;
(g)the Nominated Service Contracts to be assigned to Think in accordance with clause 20; and
(h)and all other tangible assets or intangible assets owned or used by the Seller in the conduct and operation of the Business at the Agreement Date, but excluding the Excluded Assets.

Business Records means in relation to the Business:
(a) a list of the current clients/customers of the Business, including parents and children’s names, addresses and contact numbers;
(b) a “parent bonds received” report;
(c) a “parent debtors” report;
(d) copies of all written policies used in the conduct of the Business, including information for parents and the prescribed child care service records system as required by any relevant Regulatory Authority or Law;
(e)supplier lists;
(f)originals or copies of the records of Employees and of the entitlements referred to in clause 9 (Employment and Superannuation);
(g)computer program, data bases, software and negatives;
(h) originals or copies of ledgers, journals and books of account; and
(i)all other documents or information necessary or desirable to conduct the Business as a going concern that is within the Seller’s possession, power or control.

Child Placements means the number of children able to be placed with the Business under the Service Approval [the licence or approval issued by the Regulatory Authority] as specified in item 13 of the items schedule [ as 82, being the maximum number of sessions per day]
Completion means completion of the sale and purchase of the Business and the Business Assets under clause 5.
Completion Date means the date which is seven (7) days after the satisfaction or waiver of all the Conditions contained in clause 3.1 (except the condition contained in clause 3.1 (f)) or, in the event that such date is not a Friday, then the following Friday.
Due Diligence Completion Date means the date being fourteen (14) days from the date on which the Seller provides all of the Due Diligence Material to Think or, if Think reasonably requests further information from the Seller for the purposes of its due diligence investigations prior to that date, the date being seven (7) days from the date on which the Seller provides Think with such further information.
Due Diligence Material means all information and material (including the Financial Information) provided by the Seller or any of its representatives to Think or any of its representatives in relation to the Seller, the Business and the Business Assets prior to the Agreement Date and following the Agreement Date, an index of which is set out in Schedule 6, which will be updated prior to the Completion Date to include all further information and material provided.
Excluded Assets means the following assets of the Seller used in or forming part of the Business, which are excluded from the sale of the Business and the Business Assets:
(a)cash, including, but not limited to, funds held with any bank or financial institution to the credit of the Seller and cash on hand as at the Completion Date;
(b)the Receivables;
(c)any other debts owed to the Seller;
(d)any Service Contract entered into by the Seller in relation to the Business other than any Nominated Service Contract which Think elects be assigned to Think pursuant to clause 20 of this Agreement;
(e)the Excluded Records;
(f)all assets exclusively used in or forming part of the Other Business (which does not form part of the Business); and
(g)the Landlord’s Assets, which, for the avoidance of doubt, are the property of the Landlord as at the Agreement Date and will remain the property of the Landlord on and from Completion.

Excluded Records means those Business Records which the Seller is required by Law to retain.
Financial Information means details of:
(a) the income earned by the Seller in relation to the Business for the 12-month period ending on the date which is five Business Days prior to the Agreement Date;
(b) the expenses (including wages) paid by the Seller in relation to the Business for the 12-month period ending on the date which is five Business Days prior to the Agreement Date; and
(c) the occupancy rate of the Business as at the date which is five Business Days prior to the Agreement Date.

Goodwill means the goodwill of the Business and includes the exclusive right for Think to represent itself as carrying on the Business as the successor of the Seller.
Intellectual Property means all industrial, commercial and intellectual property (whether registered or not and whether protected by Law or not) developed or used in connection with the Business in relation to the conduct of the Business, but excluding:
(a)the Business Name;
(b)the Email Address and Domain Name; and
(c)all other intellectual property relating to the ‘Developmental Learning Centre Rainbow’ brand which the Seller requires in order to continue operating the Other Business after Completion, including without limitation all trade marks, logos, copyright, design marks, service marks, know how, sales material and marketing material relating to the ‘Developmental Learning Centre Rainbow’ brand or the Other Business.

Material Adverse Change means a decrease of more than 7.5% in the occupancy rate of the Business when compared to the occupancy rate as at the date which is five Business Days prior to the Agreement Date (as shown in the Financial Information).
Obligations means any legal, equitable, contractual, statutory or other obligation, agreement, covenant, commitment, duty, undertaking or liability of a party.

The following are conditions precedent in the Contract relevant to matters in issue between the parties:

3.1 Conditions Precedent
The sale of the Business and Business Assets contemplated by this Agreement and Completion is conditional on the following conditions precedent:

Condition Party entitled to benefit

…

…

(c)

Finance: Think obtaining sufficient funding by the Due Think Diligence Completion Date to allow Think to pay the Purchase Price on terms and conditions which are satisfactory to Think in its absolute discretion.

Think

…

…

(f) no Material Adverse Change: as at the Completion Date, there has been no Material Adverse Change since the Agreement Date. Think

(g)
Due diligence: Think completing legal and operational due diligence investigations to the absolute satisfaction of Think by the Due Diligence Completion Date in respect to the following:

(i) the Financial Information;

(ii) the Business Records;

(iii) the requirements of any Government Agency in respect to the Business, the Premises or the Business Assets;

(iv) the Premises Lease and any issues in respect to the Premises;

(v) the Authorisations required to operate the Business;

(vi) the Employees; and any other matter determined by Think and/or or Think’s Solicitors to be relevant to the acquisition of the Business or the Business Assets.
Think

(h) Think Board Approval: Think receiving by the Due Think Diligence Completion Date an approval in writing from the board of directors of Think Parent that they consent to this Agreement and the transaction contemplated by it. Think

Clause 3.3(b) provides:

(b)Notice: Think and the Seller must each promptly notify the other in writing if it becomes aware that a Condition is satisfied or becomes incapable of being satisfied.

Clause 4 is titled ‘Period before Completion’. Clause 4.1 is titled ‘Sellers conduct of the Business’. Clause 4.1 includes that Rainbow undertakes that it will, during the period before Completion:

(b)Ordinary course: conduct the Business in the ordinary course of business and must, without limitation:
(i) accept placement of children with the Business in the ordinary course of business; and
(ii) discharge its Liabilities as and when they fall due;

(c)Give assistance: give Think every assistance reasonably required so that Think can take the benefit of this Agreement and complete and sign all documents as reasonably required by Think to allow the Conditions to be satisfied;
(d)Consult: consult with Think and keep it informed about the Business and its management and consider any reasonable suggestions and advice of Think in respect to the Business;
(e)Keep informed:
(i) advise Think if at any time, there is a Material Adverse Change; and
(ii) one week prior to the Completion Date, provide Think with a copy of the weekly occupancy reports for the Business from the Agreement Date to the date the reports are provided;

(f)Maintain: maintain and protect the Business and the Business Assets including, without limitation:
…
(ii) maintaining and renewing all Authorisations required for the Business and the Business Assets or in connection with them and keep them fully effective;

(g)Employment: deal with all Employees in a cordial and proper manner and not, other than in the ordinary course of business, employ a new person, terminate or give notice to an Employee, change a term of employment or agree to pay a bonus to an Employee without the prior written consent of Think (which consent may not be unreasonably withheld);
(h)Clients deal with all clients of the Business in a cordial manner and not, other than in the ordinary course of business, increase or vary any charge made by the Seller to any client or attempt to alter the terms of payment or remuneration by any customer to the Seller, from those agreed between the Seller and any client prior to Completion, without the prior written consent of Think (which consent may not be unreasonably withheld);
…
(i)Announcements: ensure that neither it nor any of the Seller’s Associates make a statement or announcement about the Business to any person which may adversely affect Think’s position, except as allowed in this Agreement …
(j)No abnormal or material commitments: not enter into any abnormal or unusual transaction which adversely affects the Business.

Clause 3.3(c)(i) gives rights to either party to terminate:

(c)Termination: Either party may terminate this Agreement by giving the other party written notice if a Condition:
(i)is not satisfied or waived by the party or parties entitled to the benefit of that Condition by 5.00pm on the date specified in the Condition;

Clause 2.6(f) is concerned with what is to occur if Completion does not take place. It provides:

(f)Unless otherwise stated in this Agreement, if Completion does not occur under this Agreement, the party entitled to receive the Deposit:
(i)if this Agreement is validly terminated or rescinded by Think, is Think;
(ii)if this Agreement is validly terminated or rescinded by the Seller upon Think’s breach or default under this Agreement, is the Seller, and the Stakeholder will immediately account to the entitled party the Deposit paid by Think to the Stakeholder on account of the Purchase Price.

Clause 2.4 provides:

Title and Risk
Title to all Business Assets and risk in all Business Assets passes to Think on Completion.

Clause 13 is titled ‘Warranties and General Indemnities’. It relevantly provides:

13.1 Giving of Warranties
(a)The Seller represents and warrants to Think that each of the Warranties is true:
(i)as at the Agreement Date;
(ii)on each day up to Completion; and
(iii)as at Completion.

(b)The Seller acknowledges that Think has entered into this Agreement in reliance on the Warranties.
(c)Each Warranty must be construed independently and is not limited by reference to another Warranty.
13.2 Indemnity
(a)The Seller indemnifies Think against any Claim, Liability or Cost which Think pays or is liable for arising directly or indirectly from:
(i)a Warranty being false or misleading when made or regarded as made under this Agreement; or
(ii)a breach by the Seller of this Agreement.

13.3 Qualifications to warranties
The Warranties are qualified by and Think may not make any Claim for:
(a)anything fairly disclosed in this Agreement or in the Due Diligence Material;
(b)any matter or thing of which Think or any of its representatives were actually aware as at the Agreement Date; or
…

Schedule 2, Warranty 2 titled ‘Accuracy of information’ is in the following terms:

2.1(Information) The information given to Think or its advisers by or on behalf of the Seller or its advisers about the Business and the sale of the Business Assets, including the information in the Schedules and the Due Diligence Material, is:
(a)true and is not misleading whether by omission, failure to particularise or otherwise; and
(b)comprises all information which would be material to a buyer for value of the Business Assets.

Clause 5.3(a)(ii) is concerned with Warranties given by Rainbow, and clause 5.3(a)(vii) is concerned with the Deed of Restraint. Those clauses are in the following terms:

(a)At Completion, unless agreed otherwise by the parties, the Seller must give to Think the following documents:
…
(ii)Warranties: Notice properly executed by the Seller that, to the best of the Seller’s knowledge, all of the Warranties are true and correct as at the Completion Date;
…
(vii)Deed of Restraint: the Deed of Restraint, duly executed by the Seller and each Key Person; and
…

Clause 9 of the Contract deals with employees, including offers of continuing employment with LEA at the Business. It specifies what must be done by Rainbow to encourage the employees to accept such offers:

Offer
(a)On a date to be agreed in writing by the Seller and Think, which date shall be approximately five (5) Business Days prior to the expected Completion Date, Think must make offers to all Employees for employment with Think (Think’s Offer). The offers must be:
(i)in a form approved by the Seller, which offers to each Employee terms and conditions of employment that are substantially similar to, and, considered on an overall basis, no less favourable than that Employee's current terms and conditions of employment and which offers to recognise that Employee’s prior service with the Seller as a period of continuous service with Think;
(ii)conditional on Completion occurring;
(iii)expressed to take effect on the Completion Date; and
(iv)expressed so that the acceptance by an Employee will constitute that Employee’s resignation from the Seller on the Completion Date.

(b)Think’s Offer must require an Employee to advise Think or the Seller of the Employee’s acceptance of Think’s Offer within three (3) Business Days of the date of the offer, or, if the Employee is on leave, within three (3) Business Days of the date the Employee returns from leave;
(c)Think and the Seller must use their reasonable endeavours to encourage the Employees to accept Think’s Offer.

Clause 14 is concerned with events of default. A clause 14.1 Event of Default entitling the opposite party to terminate occurs if the other party fails to comply with its Obligations as defined in clause 1.1. Default relevant to the pleaded claims is dealt with in clauses 14.1(a), (b) and (f), and 14.2(a) and (d):

14.1 Event of Default
Any of the following events will constitute an Event of Default:
(a)if a party fails to comply with any of its Obligations in accordance with the provisions of this Agreement;
(b)if a party is guilty of gross or continuing misconduct or negligence in the observance or performance of any provision of this Agreement;
…
(f)if a party commits an irremediable breach in respect of any of its Obligations under this Agreement.
14.2 Remedies

If an Event of Default occurs the non-defaulting party can do any one or more of the following:
(a)terminate this Agreement, but only where the Event of Default occurs prior to Completion and the non-defaulting party gives notice of termination prior to Completion;
…
(d)exercise any other Right, power or privilege conferred on it by this Agreement or at Law, common law or equity.

Schedule 2 of the Contract set out the Warranties provided by Rainbow including Warranty 2.1:

Warranty 2 – Accuracy of Information
2.1 (Information) The information given to Think or its advisers by or on behalf of [Rainbow] or its advisers about the Business and the sale of the Business Assets, including the information in the Schedules and the Due Diligence Material, is:
(a)true and is not misleading whether by omission, failure to particularise or otherwise; and
(b)comprises all information which would be material to a buyer for value of the Business Assets.

Schedule 4 comprises the Deed of Restraint binding Rainbow, Ms Shulina and Mr Shulin. Clause 5.3(a)(vii) required that the duly executed Deed of Restraint be provided to LEA at Completion. Clause 1.1 of Schedule 4 contains a general restraint that includes:

(b)without the prior written consent of Think, the Seller and the Key Persons and each of them jointly and severally will not, whether directly or indirectly and whether solely or jointly with or as an officeholder, partner, associate, agent, shareholder, unitholder, corporation, employee, manager, contractor, consultant or in any capacity whatever for the period and within the area specified in this clause:
(i)carry on or be financially or otherwise interested in or be engaged in or concerned with any business which is or is likely to be in competition to any material extent with the Business;
(ii)induce or solicit any employee or agent of Think to leave the employment or agency of Think;
(iii)approach or accept any approach from any customer who has been a customer of the Business within two years immediately preceding the Completion Date with the view to soliciting the business of that customer; and
(iv)be concerned with or interested in any firm or company which carries on the business of a child care centre;

Clause 1.3 of Schedule 4 contains important exceptions:

(a)where they carry on or otherwise have an interest in the Other Business;
(b)where they offer employment with the Other Business to any Employee who does not accept Think's Offer in accordance with the Sale Agreement;
…
(d) where they accept the business of any current or former customer of the Business who wishes to do business with the Other Business after Completion;

The Contract as executed on 9 June 2017, including the Warranties in Schedule 2 and the requirement for the provision of the executed Deed of Restraint in Schedule 4 at Completion, followed negotiation over many months between the parties. The first draft contract that was exchanged was a version prepared by THINK on behalf of LEA around 15 February 2017.[23] It was a ’standard form’ THINK business acquisition contract for the purchase of a childcare business.[24] The Rainbow Parties placed considerable emphasis at trial upon the differences between that first draft standard form THINK contract and the Contract as executed when it came to questions of contract construction.
[23]Plaintiff tender bundle, 39, 43-142 [CB 248-315].
[24]Paul Hunter cross examination, Transcript 164.14.

C. The Claims by LEA

LEA’s first contract claim is that, as at the Completion Date, there was a Material Adverse Change with the consequence that Condition Precedent to Completion 3.1(f) was not satisfied. Whether or not that is so depends upon the meaning of the defined term, ‘Material Adverse Change’ and what constitutes a decrease in the ‘occupancy rate’ of the Business.[25]
[25]Plaintiff, Outline of opening submissions, 29 June 2020 (‘LEA opening submissions’), [31].

It is common ground that prior to Completion there was no actual reduction in the occupancy rate of the Business as reported in the ‘QikKids’ software generated utilisation reports.

For LEA to succeed on this claim requires the Court to adopt a construction of Material Adverse Change that goes beyond a comparison of actual occupancy based upon the data contained in the weekly utilisation reports for two different time periods.

LEA submitted that if it was known prior to Completion that the occupancy rate was expected to change after Completion, that such knowledge was required to be taken into account in determining whether there had been a Material Adverse Change as defined. In closing submissions LEA submitted ’if you’re running a business and you know that on the next day there’s going to be a large drop in numbers, then that’s a fall in occupancy on that date [and therefore a Material Adverse Change] to your business’.[26]
[26]Transcript 343.12. Words in italics added.

LEA’s remaining contractual claims depend on the same factual matters but turn on the failure by Rainbow to disclose ‘the information’ that LEA contends Rainbow was required to disclose to LEA prior to Completion.[27] There was considerable debate as to what comprised ‘the information’ that LEA contends ought to have been but was not disclosed. The Rainbow Parties maintained that the case must be conducted as per the pleadings, a proposition from which LEA did not demur. What constitutes ‘the information’ for the purposes of the case as pleaded and conducted at trial is discussed separately in section G below.
[27]Referred to in LEA opening submissions, [34] as ‘Disclosable Information’.

In summary, LEA submitted that the effect of ‘the information’ that should have been and was not disclosed prior to Completion was that 16 children who had accounted for 55 to 62 sessions per week at the Business in the month up to Completion would leave the centre before LEA’s first (business) day. The departure of these children, once it occurred, would represent a drop in occupancy of more than 20% compared to the position on the Agreement Date.

LEA contended there were four reasons under the Contract why Rainbow was required to disclose the information:

(a)First, because Rainbow was obliged by clause 4.1(e) to tell LEA if there had been a Material Adverse Change, a decrease of more than 7.5% in the occupancy rate of the Business compared to the occupancy rate five Business Days prior to the Agreement Date.[28] The critical question here is whether on a proper construction of the Contract there was such a Material Adverse Change. It is common ground that, if there was such a change, Rainbow did not inform LEA of it.
(b)Second, because by clause 4.1(d) Rainbow gave an undertaking that it would keep LEA informed about the Business and its management, from the Agreement Date until Completion, Rainbow was required to keep LEA informed of facts and matters representing a sudden and large drop in enrolment for the Business expected to occur immediately after Completion.[29] LEA contended that such information constituted Due Diligence Material required to be provided to it as the purchaser.[30]
(c)Third, because Rainbow represented and warranted that each of the Warranties, including Warranty 2.1 was true on each day up to Completion and as at Completion (clause 13.1(a)). Warranty 2.1 required that information given to LEA about the Business and the sale of the Business Assets was true and not misleading whether by omission, failure to particularise or otherwise, and that it comprised all information that would be material to a buyer for value of the Business Assets. LEA submitted that Warranty 2.1 imposed a continuing obligation upon Rainbow to ensure that LEA was provided with full and accurate information about the Business each and every day up until Completion and the discharge of the Warranty obligation required the provision of ‘the information’. Warranty 2.1 , read with clause 13.1(a) is said by LEA to have been breached each day between 7 and 10 August 2017.
(d)Fourth, because the information had not been disclosed, the Warranties were not all true and correct. As a consequence, LEA could not, other than in breach of Clause 5.3(a)(ii), give notice as it did at Completion in the form of the Deed Poll.[31] By the Deed Poll,[32] signed by Ms Shulin, Rainbow warranted as at 11 August 2017 that to the best of its knowledge all the Warranties were true and correct when in fact they were not. LEA contended that because the information had not been disclosed, the Warranties were not all true and correct and that the Deed Poll should not have been provided at Completion as provided for in clause 5.3(a)(ii) of the Contract. Clause 5.8 made the obligation imposed on LEA to pay the Completion Payment conditional on Rainbow performing its Obligations under clause 5 of the Contract.[33]

[28]Plaintiff, Outline of closing submissions, 20 July 2020 (‘LEA closing submissions’), [16].

[29]LEA opening submissions, [36]; ASC, [23].

[30]Ibid, [39].

[31]Ibid, [43].

[32]CB 1141.

[33]See Contract, clause 1.1, (the purchase price less the deposit, subject to adjustments) conditional upon the performance by Rainbow of its obligations in clause 5, including the provision of the Deed Poll.

LEA contended that each of Rainbow’s separate breaches entitled it to terminate the Contract. Further, that had LEA been aware of the information, it would have terminated the Contract.

The asserted entitlement to terminate the Contract was pleaded and argued in this way:

(a) Rainbow was obliged to tell LEA there has been a Material Adverse Change, as defined (ASC [19], Contract clause 4.1(e)(i)). The planned change in enrolments constituted Material Adverse Change. If Rainbow had told LEA about the Material Adverse Change as required, LEA would have terminated for non-fulfilment of a condition precedent pursuant to clause 3.3(c).[34]

(b) If Rainbow provided the information, which constituted Due Diligence Material, as it ought to have done between 7 and 10 August 2017, three of the conditions precedent: finance, due diligence, and board approval, Contract clauses 3.1(c), 3.1(g), 3.1(h), would not have been met, and LEA would have terminated the Contract.[35]

(c) Rainbow was obliged to give Notice at Completion that the Warranties are true and correct (clause 5.3(a)(ii)). If Rainbow had not given Notice as it did in the form of the Deed Poll (because the Warranties were not true and correct) LEA would have terminated pursuant to clauses 5.8, 14.2(a) and 14.2(d).[36]

[34]LEA closing submissions [35]; ASC, [21].

[35]Contract clause 3.3(c), 3.1(g), 3.1(h) [CB 369-370]; LEA closing submissions [36], [39]-[41]; ASC, [25].

[36]LEA closing submissions [42]; ASC, [32].

Separately LEA pleads that it would not have completed the Contract if it had known of misleading and deceptive conduct engaged in by the Rainbow Parties contrary to s 18 of the ACL.[37] The conduct of which complaint is made comprises:

(a) the failure to give and remaining silent about ‘the information’ on or about 9 August 2017, the date of Ms Mawer’s visit; and

(b) the execution and supply of the Deed Poll (at Completion).[38]

[37]ASC, [36].

[38]ASC, [12]-[15].

The failure to provide ‘the information’ to Ms Mawer is said by LEA to constitute misleading conduct involving silence or omission; the provision of the Deed Poll is said to constitute a misleading representation.[39] It is alleged that if it were not for the misleading and deceptive conduct contrary to s 18 that LEA would not have completed the Contract. LEA claims damages on that basis.
[39]LEA closing submissions [34].

LEA alleges that Rainbow engaged in such conduct. It also alleges that Ms Shulina and Mr Shulin were involved in contraventions of the ACL by Rainbow, and in the alternative that by their failure to disclose ‘the information’ that Ms Shulina and Mr Shulin engaged in misleading and deceptive conduct in breach of the ACL.[40]
[40]Competition and Consumer Act 2010 (Cth) sch 2 (‘ACL’), s 2(1), 236(1); ASC, [37]-[38].

It is accepted by LEA that in order to establish accessorial liability, LEA must prove Ms Shulina and/or Mr Shulin to be an intentional participant, with the necessary intent being based upon knowledge of the essential elements of the contravention.[41] LEA submits that each of Ms Shulina and Mr Shulin had the requisite knowledge.
[41]Yorke v Lucas (1985) 158 CLR 661.

Because of the manner in which the various claims were pleaded and argued, an important issue for determination was the counterfactual, what would have happened if ‘the information’ had been disclosed.[42]
[42]LEA closing submissions, [5].

LEA contended that if ‘the information’ had been disclosed:

(a)it could have terminated at any time up until Completion if there had been a Material Adverse Change;[43]
(b)because ‘the information’ constituted Due Diligence Material, the Due Diligence Completion Date would have been pushed out for a further 14 days, giving LEA further time to assess whether the three conditions precedent in clauses 3.1(c), 3.1(g) and 3.1(h) had been met and, if not met, giving LEA the right to terminate;[44]

(c) assuming that LEA had the right to terminate, it would have done so.

[43]Ibid, [5].

[44]Ibid, [37]-[40].

The Rainbow Parties deny liability in relation to each of the LEA claims. Separately they submit that each of the claims brought by LEA, including the ACL claims, are based upon the premise that LEA had a contractual entitlement to terminate; and that if informed about the matters of which complaint is made, it would have exercised that right and would not have completed the Contract. They contest the LEA arguments as to the extension of the Due Diligence period and the claimed entitlement by LEA to terminate even if breach is made out. They dispute what LEA says it would have done if it had known of ‘the information’. Accordingly, they do not accept that LEA is entitled to damages, even if breach or misleading and deceptive conduct is proven.

D. The Witnesses

Ms Mawer is currently the National Services Delivery Manager of THINK. Ms Mawer has been employed by THINK since 2009 and in that time has been involved in coordinating the acquisition by THINK of around 25 childcare centres.

Ms Mawer was the person responsible for the operational transition from Rainbow to THINK’s subsidiary, LEA. In that capacity she prepared the letter from THINK sent as an enclosure to the Announcement Email on 4 August 2017 about the pending transition. She received only one email response to the letter, from one of the parents, to whom Ms Mawer replied about an hour later.

On 9 August 2017 Ms Mawer attended the Business. She did not meet with any parents of children attending the centre. She met with the educators then employed by Rainbow. She prepared a letter to staff and new contracts for those staff who agreed to remain. During her visit she was informed that five of the educators at the Business would not be accepting offers of employment. The remaining employees agreed to continue employment when under new ownership.

The five educators who did not take up offers of employment made by Ms Mawer either continued or, at the time were expected by Mr Shulin to continue their employment with Rainbow by transferring to the Moorabbin Business. The evidence does not reveal whether Ms Mawer knew or suspected that would be the case.

Ms Mawer gave evidence about discussions with Mr Shulin in relation to enrolment forms during the visit on 9 August. Ms Mawer asked Mr Shulin if she could leave new enrolment forms with him, to be provided to families with children attending the Centre to fill out. Mr Shulin said yes. He also agreed to leave Rainbow’s enrolment records at the Centre until new enrolment forms were completed by LEA. He showed Ms Mawer where the records were kept, in a filing cabinet in his office.

Earlier, on about 31 July, according to the evidence of Mr Shulin, Ms Mawer had asked him to leave Rainbow’s completed enrolment forms behind. He spoke to the Department of Education in order to confirm whether this was allowed. In his witness statement he said that he thought it would be necessary to leave the forms so as to allow LEA to look after children enrolled after Completion. In an email from his solicitor, Mr Brownstein, on 10 August 2017 to Ms Bui, the in-house lawyer for the purchaser, copied to Mr Shulin and Ms Shulina, the writer advised that Mr Shulin agreed to leave original records and documents, including agreements with families, until 25 August 2017 to allow LEA to transition the business but then, because he was required by law to retain all documents, they were to be returned to him.[45]
[45]CB 1140.

Ms Mawer gave evidence, about which she was not cross-examined, that during the visit to the Business on 9 August, she asked Mr Shulin whether there was any specific information he wanted to pass on or whether he had heard any concerns from the educators. Ms Mawer did not recall Mr Shulin saying anything in response.

It was Ms Mawer’s evidence that Mr Shulin did not disclose to her both the requests and the arrangements for a large number of the children at the Business to move to the Moorabbin Business. That evidence was not challenged.

Ms Mawer confirmed in cross-examination that by the close of business on 14 August 2017, the first day of operation of the childcare centre by LEA, LEA only held three signed enrolment forms.

Mr Hunter is employed by THINK as its Business Acquisition Manager. He assesses potential acquisitions and makes recommendations about whether to pursue a potential acquisition, and the terms of any offer to be made (primarily around price). In fulfilling this role Mr Hunter uses a valuation model prepared for THINK by a third party consultant with expertise in valuation. The primary inputs to the valuation model are profit and loss, utilisation reports for the past 12 months, and a copy of the lease for the premises. THINK did not share its valuation model with Rainbow or its lawyers.[46]
[46]Transcript 163.1-26.

Mr Hunter’s evidence was that utilisation reports are the ‘sole’ indicator of revenue for a childcare centre.[47] Utilisation reports are reliable because enrolment numbers must be reported to the Commonwealth Government and determine the amount of the Child Care Subsidy payable. In Mr Hunter’s experience, the utilisation rate for a ‘mature’ centre, such as the Business, remains constant or trends upwards.
[47]Plaintiff, First Paul Hunter Witness Statement, 18 February 2020 (‘First Hunter Statement’), [12].

Both Rainbow and Think use the ‘QikKids’ software to generate utilisation reports. It was Mr Hunter’s evidence that QikKids discloses three factors: utilisation, occupancy and attendance.[48]
[48]Transcript 160.25.

Profit and loss statements are primarily used to verify utilisation reports provided. In his witness statement, Mr Hunter stated that by using demographic data he is able to model the amount of fees payable for attendance at a given centre, and the level of supply in a particular area. That is, by reference to the presence of young families in the area. The valuation model assumes standard operating costs including consumables, marketing, repairs and maintenance, services, IT, cleaning and wages.[49]
[49]First Hunter Statement [24].

Mr Hunter selected the inputs to the valuation model in connection with the decision to purchase the Business. From Mr Shulin he obtained the rate of daily fees charged by the centre, a profit and loss statement and weekly utilisation reports. He attended the centre and formed the view that some capital expenditure would be required to improve the centre to THINK‘s standards. He negotiated the amount of rent payable to Mr Shulin as the property owner.

Mr Hunter described the process of calculating the offer price for the Business of $3.4 million as follows:

I had calculated the price of $3,400,000 by inserting the average utilisation rate provided to me by Mr Shulin and nominated rental expense into [the model] … This leads to a final EBITDA figure, which for the Bentleigh East Centre was $861,272. Applying a multiple of 4 (as most of Think’s centres are purchased at this multiple), I arrived at a figure of around $3,400,000, which round figure I then used as the offer price.

Although he was responsible for providing the THINK standard form contract of sale to Mr Shulin in February 2017, Mr Hunter was unable to comment upon that document which, like the valuation model, was prepared by others. Mr Hunter confirmed that he knew that the brand name Rainbow was not being transferred although to his recollection that issue came up late in the piece. He knew about the Moorabbin Business operated by Mr and Mrs Shulin and by Rainbow.

Mr Hunter was cross-examined about a discussion in mid-February 2017 with Mr Shulin, concerning the return of bonds. Mr Shulin gave evidence that he told Mr Hunter that to return bonds to families rather than to transfer them to the purchaser would be a bad idea.[50] Mr Hunter was unable to recall such a conversation.[51]
[50]Defendant, First Oleg Shulin Witness Statement, [34].
[51]Transcript, 165.

Mr Hunter gave evidence in his witness statement about the names attributed to rooms by Rainbow and how he and THINK interpreted those names as referring to children in specific age groups. It was his evidence that ‘pre-school’ referred to children between three and six years of age.[52] When cross-examined, he accepted that this was his descriptor and interpretation.
[52]Plaintiff, Second Paul Hunter Witness Statement, [11].

Mr Hunter said that Mr Shulin told him that one room at the centre catered for two to three year olds and the rest catered for three year olds and over.[53] That evidence is contradicted by the detailed utilisation schedules provided by Rainbow, which refer to five rooms being divided in use, with one room for toddlers, pre-kinder, and kinder children, and two rooms for pre-schoolers.[54] It is also contradicted by the evidence of Mr Shulin.
[53]Transcript 172.21.
[54]CB 421-454.

Mr Shulin gave evidence that children were organised into groups by age. Each room was dedicated to a particular age group, which was reflected by signage affixed to the door of the relevant room. Children would not be placed into mixed-age rooms because they are at different stages of development. For example, the ‘pre-school’ group was for children who would be leaving the Centre to commence primary school in the following year. Children in the pre-school group were aged between four and five years old and approximately 90% would leave the Centre at the start of the following educational year. The kinder room was for children aged three to four years, the pre-kinder room for children aged between two and three years, and the toddler room for children aged between one and two years.

Mr Shulin said that he explained the age categorization and room system to Mr Hunter when Mr Hunter attended the Business in February 2017. At that time Mr Shulin showed Mr Hunter each room and explained the age range of the children that would attend classes in it, because ‘this is important’.

Mr Hunter exhibited a poor recollection of the events about which he was cross-examined. I accept the evidence of Mr Shulin as to the February 2017 visit. I do not accept Mr Hunter’s evidence as to either the conversation or as to the allocation of children as between rooms. On those topics I prefer the evidence of Mr Shulin. Those matters were clearly matters well known to Mr Shulin and I have no reason to doubt his recollection.

Mr Edwards is the CEO of THINK, the parent company of LEA. Prior to THINK’s incorporation, Mr Edwards owned a 50% interest in Learning Education Australia Pty Ltd. In 2009 Learning Education acquired 12 childcare centres and thereafter it continued to acquire, develop and ‘trade–up’ childcare centres. In 2014, Mr Edwards and his business partners created THINK. THINK acquired the assets of Learning Education. Mr Edwards has been the managing director and CEO of THINK since its incorporation. In 2017 THINK owned and operated 38 childcare centres.

Mr Edwards was not across the detail of the transaction. Exhibited to his witness statement is the Board paper in relation to the decision to purchase the centre. It is to be noted that when describing the proposed acquisition of the Business the Board paper identified ten centres in Bentleigh East, inclusive of the subject, plus another in McKinnon. However, it made no mention of the Moorabbin Business, 2.5 kilometres away also owned by Rainbow. Nor did it make mention of the Deed of Restraint and the exceptions in favour of Rainbow and Mr and Mrs Shulin concerning the Moorabbin Business.

Mr Edwards was cross-examined about the age composition of children attending the centre. From his answers and the evidence of the other witnesses called on behalf of LEA, it is clear that the due diligence carried out in relation to the purchase was perfunctory at best. That was particularly so concerning the identification and consideration of any individual or unique features or attributes of the centre and of the families attending it. By way of example, there was no information night or similar event conducted by LEA prior to 11 August at which any representative of LEA or THINK met with the families and sought to obtain an understanding of their needs and aspirations for their children.

The utilisation schedule attached to the Contract shows that in the week prior to the Agreement Date, of 287 places utilised at the childcare centre, 51.2% of places were taken up by children who were in the four to five year old age group.[55] Mr Edwards gave evidence that typically there is a dip in attendances around the end of the year, from the last week or so in December. He agreed in cross-examination that some five year olds would go to school in the following year and that some four year olds would stay.[56] Mr Edwards accepted that part of these places would need to be replenished in February of the following year.[57] He accepted that it would be necessary to know the birthdates of the children to know those who would likely be going off to school and whose places would therefore need to be ‘replenished’.[58]
[55]CB 421–54, 454.
[56]Transcript 185.5.
[57]Ibid, 183.24.
[58]Ibid, 185.26.

As far as Mr Edwards was aware, neither THINK nor LEA asked for birthdate information.[59] If LEA had enquired and been told as part of the due diligence process, it would have known the risk to future enrolments from December 2017.
[59]Ibid, 187.11.

Mr Edwards was cross-examined about that part of his witness statement directed to the counterfactual, what THINK and LEA would have done if ‘the information’ had been disclosed. Mr Edwards was quite tentative in responding to questions both in cross examination and in re-examination concerning this critical topic.

On the face of his witness statement, if he had known about ‘the information’, Mr Edwards would not have proceeded with the acquisition, and would have recommended to the Board that LEA no longer acquire the Business. That was not how his evidence emerged at trial.

In cross-examination Mr Edwards said that he would have withdrawn from the Contract prior to settlement if he had known that utilisation at that time was as low as 54 – 63%.[60] I took his answer clearly and deliberately to refer to actual utilisation, not in any way tied to the future, what might occur after Completion. In re-examination he was asked what he would have done if he had realised or learned that arrangements had been made for children to leave immediately after settlement of the Contract.[61] In response he said first that he would seek to understand why it was that children were withdrawing and next, that he would have sought whatever remedies he had under the Contract or would have moved to renegotiate the Contract.
[60]Transcript 180.10.
[61]Ibid, 189.1.

Mr Hockley of Grant Thornton gave expert evidence on behalf of LEA. He produced a report titled ‘LEA Childcare Services Pty Ltd v Development Leaning Centre Rainbow Pty Ltd & Ors – Independent Expert Report’ dated 3 April 2020 (‘Hockley Expert Report’), setting out his opinion regarding the market value of the Business at the date of Completion.[62]
[62]Hockley Expert Report, CB 93.

The damages claim on behalf of LEA is quantified as the difference between what was paid, $3.4 million, and what the market value of the business was, if post Completion utilisation rates were known at the time of Completion. In the opinion of Mr Hockley, the market value of the business on that second and assumed basis was $1.245 million.

Mr Hockley was provided with weekly utilisation schedules for the Business for the period 6 July 2015 to 10 December 2017.[63] Mr Hockley noted that in the week immediately after Completion the utilisation rate decreased from 69.0% to 47.6%.[64]
[63]Ibid, 110.
[64]Ibid, 110.

To ascertain the future maintainable earnings having regard to the post-transaction utilisation of the Business, Mr Hockley undertook the following analysis:

(a) he calculated the future maintainable earnings (EBIT), assuming utilisation percentages based on the experience of LEA after Completion;

(b) he calculated the future maintainable earnings by using this utilisation rate, applied it to the forecast income, and adjusted the FY2016 cost base for variable expense movement and appropriate adjustments to fixed costs, excluding any synergistic benefits that Mr Hockley assumed may have been available to LEA upon acquisition;

(c) he calculated the enterprise value, using the calculated future maintainable earnings and applying an implied transaction multiple.[65]

[65]Ibid, 121.

Mr Hockley considered that the future maintainable earnings methodology was appropriate when valuing the business as it was both actively trading and anticipated to continue to operate as a going concern.[66] He concluded that the EBIT of the Business was $285,000.[67] In selecting an appropriate earnings multiple, Mr Hockley considered the trading multiples of companies operating in the broader child care services sector listed on the ASX and on overseas markets. Based on his investigations he reported a range of transaction multiples from 4.0 to 5.2.[68]
[66]Ibid, 91, 121.
[67]Ibid, 132.
[68]Ibid, 109.

Mr Hockley considered the implied multiple of 4.37 to be a reasonable multiple to apply in determining the market value as at Completion taking into account factors that include the post Completion utilisation as known as at the date of Completion.[69]
[69]Ibid, 133.

Applying the adopted capitalisation multiple of 4.37 times, to the revised future maintainable earnings of $285,000, based on the post-transaction utilisation rates, Mr Hockley concluded that the market value of the Business was $1.245 million at the Date of Completion.[70]
[70]Ibid, 134.

The cross-examination of Mr Hockley was directed to matters which he agreed were relevant to a valuation of the business purchased by LEA. However, all were matters about which he had no instructions and therefore did not take into account in forming his opinions. Those matters were as follows:

(a) Mr Hockley was not given a copy of the Contract;

(b) he was not told what business assets were to be transferred;

(c) he was not told that the Rainbow brand was to remain with the vendor and nor was he told anything about Rainbow’s retention of its intellectual property;

(d) he was not told that as at Completion all enrolments would cease;

(e) he was not told that as a result of government regulation a new service provider was required to complete a fresh enrolment form for each child who attended the centre operated by that service provider;

(f) he was not told that the purchaser had only secured signed enrolment forms for one child by the close of business on 11 August 2017 and for three children by 14 August 2017;

(g) he was not told that the purchaser had not contacted parents directly or conducted information seminars or similar events;

(h) he was not told and did not know the position concerning staff contracts;

(i) importantly, he was not told that Rainbow conducted another centre 2.5 km away in Moorabbin. Nor was he given any instructions or information concerning the Deed of Restraint and the exception in the Deed concerning the Moorabbin Business.

In cross-examination Mr Hockley agreed that his valuation as at Completion taking into account each of these matters, combined with the utilisation information that he had considered may actually be lower on the basis of the further information provided. In particular, if the purchaser was not gaining the Rainbow business name and had not spoken to parents about a transition then this would in his opinion impact on value, reducing his assessment of the value of the Business to less than $1.245m.[71]
[71]Transcript, 212.

Mr Shulin was a critical witness. He filed two witness statements. The first was filed on 3 March 2020 and the second on 26 June 2020. In the intervening period the Rainbow Parties gave discovery of email communications in the period 4 August 2017 and 14 August 2020 passing between Rainbow and families of children at the Business. Mr Shulin had not referred to those communications in his first witness statement.

Mr Shulin was cross-examined over the course of approximately one sitting day. For the most part his evidence was responsive to the cross-examiner. However, when it came to questions about the Announcement Email, his communications with parents following the Announcement Email concerning requests and possible transfer of children to the Moorabbin Business, and his communications with staff at the centre who either transferred or, who it was expected by him at the time would transfer to the Moorabbin Business, his answers were not particularly responsive.

The Announcement Email included a reassuring commitment from Rainbow that Rainbow ‘will remain running and operating our Moorabbin campus as usual, and therefore no changes will affect families at DLC Rainbow, Moorabbin’. Cross-examined about the cohort to whom the email was directed, initially Mr Shulin said that he was ‘not sure’ if any of the recipients of the email had children at the Moorabbin Business. He subsequently said that it ‘looks like’ the Announcement Email was sent to parents of children attending the Business only.[72]
[72]Ibid, 232.29–31.

Clearly the Announcement Email which enclosed the THINK welcome letter was only ever intended for and was only sent to families with children attending the Business. There is only one explanation for Mr Shulin mentioning the position at the Moorabbin Business in the Announcement Email to the families of children attending the Business. That is, so as to invite or induce those families to consider transferring their children to the Moorabbin Business and to do so instead of remaining at the Business after Completion.

It emerged in cross-examination that on Thursday, 10 August 2020 Mr Shulin sought legal advice about whether he needed to tell LEA about the requests he had received from families to move.[73] He said that he asked Rainbow’s solicitors because he did not know if he needed to tell LEA about those matters or not.[74] Whilst the content of the advice that he received was the subject of a claim for legal professional privilege, his evidence was that the response that he got was ‘as I acted’.[75]
[73]Ibid, 288.23.
[74]Ibid, 289.4.
[75]Ibid, 289.6.

Mr Shulin deliberately delayed responding personally to emails from the families who had notified an intention to transfer their children until after Completion. His formal responses were those sent by email, the majority sent between approximately 1.00am and 2.30am the morning of Saturday, 12 August 2017. His behaviour in that regard is to be contrasted with what he said he would have done if, in the ordinary course of Rainbow’s business, parents made a request for a child to move. In such a case he would wish to find out the reasons for that request.[76] That is, so as to see whether or not the child could be retained at the Centre. That was not the approach that Mr Shulin adopted when it came to parents expressing desire, by email, to transfer their child or children from the Business to the Moorabbin Business.
[76]Ibid, 251.

The emails from families following the Announcement Email, of which there were 19 received by Rainbow between the Announcement Email and Completion, were sent by the families because when they asked Mr Shulin about what he described as the ‘possibility to move’ children, Mr Shulin told the family to send an email.[77] That is not what he would have said in the ordinary course of conducting the Business. While he may have responded as he in fact did to an isolated request to transfer, by the end of Sunday, 6 August 2017, 11 families whose children accounted for 44 days or 15.5% of enrolments at the Business had expressed a ‘possibility to move’ in response to which, on each occasion, Mr Shulin told the family in question to send an email. That is not what he would have done had it not been for the fact Completion was imminent and the Moorabbin Business was being retained.
[77]Ibid, 247.30.

The emails were sent by the families to an email address to which Mr Shulin, his wife and the administration staff of Rainbow, including Mr Chua, all had access. The evidence of Mr Shulin is that he and his wife owned and operated both businesses and worked as a couple with shared responsibility, keeping each other informed and sharing information.[78]
[78]Ibid, 228.26–229.5.

At 12.09 on Friday 4 August 2017, one parent sent an email in substance as Mr Shulin said parents should send, asking Rainbow ‘is there space in the Moorabbin campus’.[79] At 2.20pm on Friday 4 August 2017, J’Remy Chua, coordinator of that campus, on behalf of Rainbow responded to that email:

Dear Parents,
Hope that you are well when you receive this email.
I understand that this could be a stressful time but rest assure that we are here to help as much as we can.
Please list down your child currently class and days attending.
We would be placing your child under the waiting list as we would contact you shortly.

[79]CB 1636 - 1637.

In cross-examination Mr Shulin said that the emails from parents ‘expressed a possibility to move’.[80] There were three emails in identical terms to that set out above sent by Mr Chua in response to emails from parents between the Announcement Email and Completion. While Mr Shulin said he could not remember whether he told Mr Chua to send the responses, I do not accept that the responses to emails which Mr Shulin himself had invited families to send, sent by Mr Chua, were responses sent without Mr Shulin’s knowledge. To countenance the sending of such responses, given the volume of requests to transfer of which Mr Shulin was clearly aware, was not in the usual or ordinary course of conduct of the Business.
[80]Transcript, 248.9.

In the case of the Caswell family, Mr Shulin received an email with a request to transfer on 6 August 2017 but deliberately did not respond until 6 days later, 1.49am on 12 August 2017. That response was to offer Lucy Caswell a place at the Moorabbin Business. Mr Shulin did not respond to the Caswell family request as he would have done in the ordinary course of Rainbow’s business, in a timely way, and with a view to seeking to ensure that the child in question remained at the Business. It was his evidence that if a childcare business loses a child, it has likely lost that child forever. For that reason the two week notice period was important to the business, it gave Rainbow the opportunity to ask parents for their reasons. That is how Mr Shulin normally ran the business.[81] He did not tell any of the parents who enquired between 4 and 11 August 2017 that they were required to give two weeks’ notice.
[81]Ibid, 251-252.

In the early hours of Saturday 12 August 2017 and also later that day, Mr Shulin sent 15 follow up e-mail responses to families that were in the identical terms:

Dear [ ] family,
We would like to thank you for your request to move your children to our Moorabbin campus.
We feel very honoured to have your family supporting us, showing your loyalty to our Rainbow family. It means a lot to our team, and has provided us with further incentive to strive for the best when accommodating our families and involving them in our centre, as we continue to support and guide your children throughout their learning journeys with us at Rainbow.
We are currently following our Improvement renovation plan set earlier this year, which means that our centre is not able to operate at full capacity as yet, but we give your family with priority access to our programs. Due to the limited vacancies, we kindly ask you to notify us of your booking preferences by midday, Sunday, 13th of August, in order for us to better accommodate for your request.
With great excitement, we would like to provide an overview on the new and improved program and structure plans that will be implemented within the Moorabbin campus.
Our intention is to complete centre developments as soon as possible, but until that moment we currently run three rooms at the centre: Babies; Toddler/ Pre-Kinder and Kinder/ Pre-School.
The program runs without interruption and accommodates for all children’s needs, and is inclusive of all our high standards in everyday learning curriculum and Enrichment classes. To develop versatile talents of our children we continue to follow our holistic approach in early childhood education and support our programs with quality enrichment classes of Dogs for Life, Music, Chess, Yoga, Cooking and Art classes run by our dedicated teachers.

I do not accept the Rainbow Parties submission concerning the Deed of Restraint. There was a reasonable expectation on the part of LEA that Rainbow would not approach current customers prior to Completion so as to undermine the Goodwill of the Business. That expectation arises first from of the fact that the sale of the Business included the sale of the Goodwill.[228] Second, from exception 1.3(d) to the Deed of Restraint which permits the Rainbow Parties to accept the business of existing customers of the Business centre but only ‘after Completion’, noting that it is only from after Completion that the Deed of Restraint becomes operative. Third, from the general words of restraint in clause 1.1(b)(iii) that, subject to the clause 1.3 exceptions restrained the Rainbow Parties from:

[A]pproach[ing] or accept[ing] any approach from any customer who has been a customer of the Business within 2 years immediately preceding the Completion Date with the view to soliciting the business of that customer.

[228]Refer to paragraph [216] above.

The information that LEA complains should have been disclosed to Ms Mawer on 9 August 2017 was material to the Goodwill of the business. I accept, contrary to the Rainbow submissions, that the Rainbow Parties knew that to be so. That is evident from the fact that the emails and discussions between Rainbow and the parents were private in nature; from Ms Mawer’s request that the enrolment forms remain after Completion, explicable on the basis that LEA contemplated children enrolled prior to Completion would continue at the Business after Completion; and from the fact that Mr Shulin sought legal advice, albeit on the day following Ms Mawer’s visit as to whether he was obliged to disclose the information. Mr Shulin agreed in cross-examination that if he was purchasing the Business that he would have wanted to know the information.[229] He said he would have wanted to know the information so that he could contact the parents.[230]
[229]Transcript 296.6.
[230]Ibid.

The Contract contained detailed disclosure obligations and detailed provisions dealing with Events of Default and the consequences of any such default, including in relation to undermining the Goodwill. There were contractual mechanisms to protect the integrity of the Goodwill that LEA was purchasing. However those obligations imposed upon Rainbow ended with the Due Diligence Completion Date. If there had been actions taken by Rainbow to impact the Goodwill prior to the Due Diligence Completion Date, such action would need to have been disclosed, but not so under the Contract matters that occurred after that date. There was no reasonable expectation in the context of this complex contract between commercial parties that there was an obligation to disclose events or matters that impacted the Business and that occurred on 9 August 2017, after the Due Diligence Completion Date.

I accept that it would have been evident to Rainbow at the time of Ms Mawer’s visit that LEA was labouring under a material misapprehension. While that is the case, as French CJ and Keifel J observed in Miller v BMW:

In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context.… As a general proposition, S 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision – making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid careless disregard, for its own interests, of another party of equal bargaining power and competence.[231]

[231](2010) 241 CLR 357, 369-371.

Throughout his evidence, Mr Shulin referred to THINK as a sophisticated business operation that has its own processes for dealing with handover of the business.[232] In that respect his evidence was accurate.
[232]Transcript 252.19–254.27.

As well as not availing itself of the benefit of its entitlements under clause 4.2(a) to obtain names and addresses of families, when Ms Moore attended on 9 August 2017, her focus was only upon issues relating to the staff. There is no evidence that she made any enquiries of Mr Shulin concerning children enrolled at the centre, dealings between Rainbow and the parents and families of those children or in relation to future enrolment expectations of the Business.

It is correct as submitted on behalf of LEA that the subject matter ‘occupancy’ was of central importance to the transaction. However, what was of central importance under the Contract, in contrast to the LEA/THINK standard form contract, was actual occupancy, not projected or future occupancy. Clause 3.1(f) concerning Material Adverse Change, as earlier found, operated only in relation to actual enrolments and not future or prospective enrolments. References to future enrolments and earn-out provisions in that draft standard form contract were deleted as part of the detailed negotiations prior to the execution of the Contract.[233]
[233]Refer to paragraphs [42], [170]-[171] above.

It was no part of the contractual bargain in this case that LEA was to receive ‘a transfer’ of all of the in children enrolled by Rainbow at the Business on the Monday following Completion. In essence what LEA complains of is that it had a reasonable expectation of disclosure during the 9 August 2017 visit that it would not get something (secure future enrolments) that it had not bargained to get and that the regulatory regime meant that it could not get without securing its own enrolment forms.

As Mason P said in Concrete Construction:

why should the parties be found or presumed to have intended more by what they expressly represented understood.[234]

[234](2002) 170 FLR 290, 348.

As in the case of the misleading and deceptive conduct claim based on the Deed Poll, LEA never explained how upon being provided with the information on 9 August 2017 it could have been terminated the Contract as is its pleaded case. LEA did not identify how the non-disclosure of the information on that day, or at any other time, misled it.

The relevant paragraphs of the statement of claim identify the impugned conduct and state that the conduct contravenes s 18 of the ACL. There is nowhere to be found a plea of the erroneous belief or state of mind held by LEA caused by the impugned conduct. The pleadings are not express as to how LEA was misled.

It might be that LEA mistakenly believed that Rainbow had not made arrangements to transfer any children; or that there would not be a substantial drop in occupancy after Completion; or that LEA believed that each of the children who, as it happened did transfer to the Moorabbin Business, would after Completion enrol at and continue to attend the Business. By 4 August 2017 the conditions precedent in LEA’s favour had all either been satisfied or waived. As at 9 August 2017 there was no ability under the Contract to terminate on account of non-disclosure. The 9 August 2017 meeting misleading and deceptive conduct claim as pleaded on behalf of LEA is predicated upon an ability to not complete.

I am not persuaded there was any route by which LEA could have terminated the Contract had it learned of the information on 9 August 2017 or prior to Completion on 11 August 2017.

If the mistaken belief relied on is as identified in LEA’s written submissions, namely, that LEA ‘was labouring under a material misapprehension that existing children at the [Business] would be staying at the centre’, no witness gave evidence that they held that belief. The existence of such a belief is directly contradicted by the legislation the required new enrolment forms be obtained by LEA for each child to be enrolled after Completion.

I accept the submission on behalf of the Rainbow Parties that LEA has failed to prove how the failure to disclose the information on 9 August 2017 had the potential to be misleading and deceptive.[235]
[235]Rainbow closing submissions, [17], referring to the authority in Fraser v NRMA (1995) 55 FCR 452.

In relation to both misleading and deceptive conduct claims there is a further problem. In order for LEA to succeed on either of its misleading and deceptive conduct claims it was necessary that it established on the balance of probabilities that if it had been given the information it would have terminated or not completed – the counterfactual.

Mr Edwards is the witness upon whose evidence acceptance of what THINK and LEA would have done in the counterfactual, if the information had been disclosed LEA’s case depends. His evidence was not persuasive concerning the counterfactual. He said that LEA would have sought to exercise whatever remedies it had under the Contract, be that termination, or a renegotiation of the price, but first, something Mr Edwards was clear about, it would have sought to understand the reasons for children withdrawing.[236]
[236]Transcript 189.17.

The evidence of Mr Edwards falls short, even in re-examination, of an unequivocal commitment to taking action to terminate or not complete the Contract being the action that LEA pleads that it would have taken if it had known of the information. Whilst that is LEA’s pleaded case, Mr Edwards evidence falls short of establishing on the balance of probabilities that this is what LEA would have done if it had both known of the information and had the ability to terminate or not complete the Contract.

I do not accept the evidence of Mr Edwards goes far enough to prove the counterfactual.

For those reasons the LEA claim for misleading and deceptive conduct contrary to s 18 of the ACL fails.

Q.Damages

As I have found that each of the claims by LEA fails on liability, it is unnecessary to deal with damages questions. Had it been necessary to do so, I would have acted on the expert evidence of Mr Hockley. There was no attack on Mr Hockley, his valuation methodology or as to the multiplier selected by him to determine value. There was no contest as to the enrolment numbers which he relied upon in order to determine value in the counterfactual.

It is true that Mr Hockley did not have instructions about a number of matters that were material to value and did not consider any of those matters put to him in cross examination.[237] However, these matters, if taken into account would have reduced not increased his assessment of the value of the business actually purchased by LEA and would therefore have increased rather than reduced the damage suffered by LEA as assessed by him.
[237]Refer to paragraph [97] above.

R.Disposition

The proceeding is dismissed.

If any party wishes to make submissions as to costs, they should file and serve those submissions, together with any affidavits relied upon no later than 21 days from this day.

If no submissions are received within that time then I will order that the plaintiff, LEA, pay the defendant’s costs, including reserved costs on a standard basis.

ANNEXURE A

Schedule of transfer or departure communications

Child	Days per week	Request to transfer	Rainbow seeks booking preference	Booking preference provided	Enrolment confirmed
1	Liam Solomonovich	2 days	04 Aug (12:04pm) [CB:1428]	12 Aug (2:06am) [CB:1424]	-	-
2	Kira Rachkovsky	4 days	04 Aug (12:09pm) [CB:1395]	12 Aug (2:11am) [CB:1392]	13 Aug (11:03am) [CB:1392]	13 Aug (1:28pm) [CB:1391]
3	Talia Skliar	4-5 days	04 Aug (12:12pm) [CB:1418]	12 Aug (2:14am) [CB:1413]	12 Aug (4:21pm) [CB:1413]	12 Aug (10:56pm) [CB:1412]
4	Jonathan Skliar	5 days	04 Aug (12:12pm) [CB:1418]	12 Aug (2:14am) [CB:1413]	12 Aug (4:21pm) [CB:1413]	12 Aug (10:56pm) [CB:1412]
5	Alisa Levin	4 days	04 Aug (4:21pm) [CB:1373]	12 Aug (1:55am) [CB:1371]	12 Aug (8:17am) [CB:1370]	12 Aug (10:35am) [CB:1369]
6	Maxim Levin	4 days	04 Aug (4:21pm) [CB:1373]	12 Aug (1:55am) [CB:1371]	12 Aug (8:17am) [CB:1370]	12 Aug (10:35am) [CB:1369]
7	Gwen Lim	4 days	04 Aug (6:21pm) [CB:1381]	12 Aug (1:59am) [CB:1379]	12 Aug (6:37am) [CB:1379]	12 Aug (10:22am) [CB:1378]
8	Tiffany Shim	3 days	04 Aug (7:24pm) [CB:1407]	13 Aug (10:40am) [CB:1405]	13 Aug (11:55pm) [CB:1405]	14 Aug (9:41am) [CB:1404]
9	Jacob Gladshtein	5 days	05 Aug (10:18am) [CB:1343]	12 Aug (1:53am) [CB:1341]	12 Aug (9:58am) [CB:1341]	12 Aug (11:15am) [CB:1340]
10	Lucy Caswell	4 days	06 Aug (9:18pm) [CB:1329]	12 Aug (1:49am) [CB:1327]	12 Aug (9:40am) [CB:1326]	12 Aug (11:09am) [CB:1325]
11	Eloise Caswell	4 days	06 Aug (9:18pm) [CB:1329]	12 Aug (1:49am) [CB:1327]	12 Aug (9:40am) [CB:1326]	12 Aug (11:09am) [CB:1325]
12	Maxim Gorkavstev	5 days	07 Aug (6:19pm) [CB:1362]	12 Aug (2:17am) [CB:1360]	12 Aug (2:23pm) [CB:1360]	12 Aug (10:46pm) [CB:1359]
13	Rachel Rizkalla	4 days	08 Aug (7:03pm) [CB:1400]	12 Aug (2:21am) [CB:1398]	12 Aug (9:29am) [CB:1398]	12 Aug (11:05am) [CB:1397]
14	Jordan McDonald	09 Aug (2:32pm) [CB:1443]	-	-	-
15	Andrey George	2 days	10 Aug (11:20am) [CB:1337]	12 Aug (2:26am) [CB:1335]	13 Aug (1:02pm) [CB:1335]	13 Aug (1:32pm) [CB:1334]
16	Elisha Godler	4 days	11 Aug (9:41am) [CB:1353]	12 Aug (2:25am) [CB:1351]	12 Aug (8:58am) [CB:1351]	12 Aug (10:53am) [CB:1350]
17	Lev Yakovis	3 days	12 (11:22am) [CB:1434]	12 Aug (11:34am) [CB:1433]	12 Aug (7:40pm) [CB:1431]	12 Aug (11:32pm) [CB:1430]

ANNEXURE B

Schedule of days attended by transferring or departing children

Child	Bentleigh East 17 July	Bentleigh East 24 July	Bentleigh East 31 July	Bentleigh East 7 August	Moorabbin 14 August
1	Liam Solomonovich[238]	2 days	2 days	2 days	2 days	-
2	Kira Rachkovsky[239]	4 days	4 days	4 days	4 days	4 days
3	Talia Skliar[240]	3 days	3 days	4 days	5 days	5 days
4	Jonathan Skliar[241]	4 days	4 days	5 days	5 days	5 days
5	Alisa Levin[242]	4 days	4 days	4 days	4 days	4 days
6	Maxim Levin[243]	4 days	4 days	4 days	4 days	4 days
7	Gwen Lim[244]	4 days	4 days	4 days	4 days	4 days
8	Tiffany Shim[245]	3 days	3 days	3 days	3 days	3 days
9	Jacob Gladshtein[246]	5 days	5 days	5 days	5 days	5 days
10	Lucy Caswell[247]	-	4 days	4 days	4 days	4 days
11	Eloise Caswell[248]	4 days	4 days	4 days	4 days	4 days
12	Maxim Gorkavstev[249]	5 days	5 days	5 days	5 days	5 days
13	Rachel Rizkalla[250]	4 days	4 days	4 days	4 days	3 days
14	Jordan McDonald[251]	Not discovered	Not discovered	3 days	3 days	-
15	Andry George[252]	2 days	2 days	2 days	2 days	2 days
16	Elisha Godler[253]	4 days	4 days	4 days	4 days	4 days
17	Lev Yakovis[254]	3 days	3 days	3 days	3 days	3 days

[238]Liam Solomonovich:

[239]Kira Rachkovsky:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1484] (Monday); [1485] (Tuesday); [1486] (Wednesday); [1487] (Thursday). Total: 4 days.

Week beginning 24 July: Bundle, [1519] (Monday); [1521] (Tuesday); [1523] (Wednesday); [1525] (Thursday). Total: 4 days.

Week beginning 31 July: Bundle, [1569] (Monday); [1571] (Tuesday); [1573] (Wednesday); [1575] (Thursday). Total 4 days.

Week beginning 07 Aug: Bundle, [1619] (Monday); [1621] (Tuesday); [1623] (Wednesday); [1625] (Thursday). Total 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1464] (Monday); [1466] (Tuesday); [1468] (Wednesday); [1470] (Thursday). Total: 4 days.

[240]Talia Skliar:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1494] (Monday); [1495] (Tuesday); [1497] (Thursday). Total: 3 days.

Week beginning 24 July: Bundle, [1539] (Monday); [1541] (Tuesday); [1545] (Thursday). Total: 3 days.

Week beginning 31 July: Bundle, [1589] (Monday); [1591] (Tuesday); [1593] (Wednesday); [1595] (Thursday). Total: 4 days.

Week beginning 07 Aug: Bundle, [1639] (Monday); [1641] (Tuesday); [1643] (Wednesday); [1645] (Thursday); [1647] (Friday). Total: 5 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1464] (Monday); [1466] (Tuesday); [1468] (Wednesday); [1470] (Thursday); [1472] (Friday). Total: 5 days.

[241]Jonathan Skliar:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1479] (Monday); [1480] (Tuesday); [1482] (Thursday); [1483] (Friday). Total: 4 days.

Week beginning 24 July: Bundle, [1509] (Monday); [1511] (Tuesday); [1515] (Thursday); [1517] (Friday). Total: 4 days.

Week beginning 31 July: Bundle, [1559] (Monday); [1561] (Tuesday); [1563] (Wednesday); [1565] (Thursday); [1567] (Friday). Total: 5 days.

Week beginning 07 Aug: Bundle, [1609] (Monday); [1611] (Tuesday); [1643] (Wednesday); [1615] (Thursday); [1617] (Friday). Total: 5 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1456] (Tuesday); [1458] (Wednesday); [1460] (Thursday); [1462] (Friday). Total: 5 days.

[242]Alisa Levin:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1494] (Monday); [1496] (Wednesday); [1497] (Thursday); [1498] (Friday). Total: 4 days.

Week beginning 24 July: Bundle, [1539] (Monday); [1543] (Wednesday); [1545] (Thursday); [1547] (Friday). Total: 4 days.

Week beginning 31 July: Bundle, [1589] (Monday); [1593] (Wednesday); [1595] (Thursday); [1597] (Friday). Total: 4 days.

Week beginning 07 Aug: Bundle, [1639] (Monday); [1643] (Wednesday); [1645] (Thursday); [1647] (Friday). Total: 4 days.

Moorabbin Centre

Week Beginning 14 Aug: Bundle, [1464] (Monday); [1468] (Wednesday); [1470] (Thursday); [1472] (Friday). Total: 4 days.

[243]Maxim Levin:

[244]Gwen Lim:

[245]Tiffany Shim:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1486] (Wednesday); [1487] (Thursday); [1488] (Friday). Total: 3 days.

Week beginning 24 July: Bundle, [1523] (Wednesday); [1525] (Thursday); [1527] (Friday). Total 3 days.

Week beginning 31 July: Bundle, [1523] (Wednesday); [1575] (Thursday); [1577] (Friday). Total: 3 days.

Week beginning 07 Aug: Bundle, [1623] (Wednesday); [1625] (Thursday); [1627] (Friday). Total: 3 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1468] (Wednesday); [1470] (Thursday); [1472] (Friday). Total: 3 days.

[246]Jacob Gladshtein:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1479] (Monday); [1480] (Tuesday); [1481] (Wednesday); [1482] (Thursday); [1483] (Friday). Total: 5 days.

Week beginning 24 July: Bundle, [1509] (Monday); [1511] (Tuesday); [1513] (Wednesday); [1515] (Thursday); [1517] (Friday). Total 5 days.

Week beginning 31 July: Bundle, [1559] (Monday); [1561] (Tuesday); [1563] (Wednesday); [1565] (Thursday); [1567] (Friday). Total: 5 days.

Week beginning 07 Aug: Bundle, [1609] (Monday); [1611] (Tuesday); [1643] (Wednesday); [1615] (Thursday); [1617] (Friday). Total: 5 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1456] (Tuesday); [1458] (Wednesday); [1460] (Thursday); [1462] (Friday). Total: 5 days.

[247]Lucy Caswell:

Bentleigh East Centre

Week beginning 24 July: Bundle, [1539] (Monday); [1541] (Tuesday); [1545] (Thursday); [1547] (Friday). Total: 4 days.

Week beginning 31 July: Bundle, [1589] (Monday); [1591] (Tuesday); [1595] (Thursday); [1597] (Friday). Total: 4 days.

Week beginning 07 Aug: Bundle, [1639] (Monday); [1641] (Tuesday); [1645] (Thursday); [1647] (Friday). Total: 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1464] (Monday); [1466] (Tuesday); [1470] (Thursday); [1472] (Friday). Total: 4 days.

[248]Eloise Caswell:

[249]Maxim Gorkavstev:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1479] (Monday); [1480] (Tuesday); [1481] (Wednesday); [1482] (Thursday); [1483] (Friday). Total: 5 days.

Week beginning 24 July: Bundle, [1509] (Monday); [1511] (Tuesday); [1513] (Wednesday); [1515] (Thursday); [1517] (Friday). Total: 5 days.

Week beginning 31 July: Bundle, [1559] (Monday); [1561] (Tuesday); [1563] (Wednesday); [1565] (Thursday); [1567] (Friday). Total: 5 days.

Week beginning 07 Aug: Bundle, [1609] (Monday); [1611] (Tuesday); [1643] (Wednesday); [1615] (Thursday); [1617] (Friday). Total: 5 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1456] (Tuesday); [1458] (Wednesday); [1460] (Thursday); [1462] (Friday). Total: 5 days.

[250]Rachel Rizkalla:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1479] (Monday); [1480] (Tuesday); [1482] (Thursday); [1483] (Friday). Total: 4 days.

Week beginning 24 July: Bundle, [1509] (Monday); [1511] (Tuesday); [1515] (Thursday); [1517] (Friday). Total: 4 days.

Week beginning 31 July: Bundle, [1559] (Monday); [1561] (Tuesday); [1565] (Thursday); [1567] (Friday). Total: 4 days.

Week beginning 07 Aug: Bundle, [1609] (Monday); [1611] (Tuesday); [1615] (Thursday); [1617] (Friday). Total: 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1456] (Tuesday); [1458] (Wednesday); [1462] (Friday). Total: 3 days.

[251]Jordan McDonald:

Bentleigh East Centre

Week beginning 17 July: Not discovered

Week beginning 24 July: Not discovered

Week beginning 31 July: Bundle, [1650] (Monday); [1652] (Wednesday); [1649], [1654] (Friday). Total: 3 days.

Week beginning 07 Aug: Bundle, [1648] (Monday); [1660], [1656] (Wednesday); [1657] (Friday). Total: 3 days.

[252]Andrey George:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1485] (Tuesday); [1487] (Thursday). Total: 2 days.

Week beginning 24 July: [1521] (Tuesday); [1525] (Thursday). Total: 2 days.

Week beginning 31 July: Bundle, [1571] (Tuesday); [1575] (Thursday). Total 2 days.

Week beginning 07 Aug: Bundle, [1621] (Tuesday); [1625] (Thursday). Total 2 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1466] (Tuesday); [1470] (Thursday). Total: 2 days.

[253]Elisha Godler:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1484] (Monday); [1485] (Tuesday); [1486] (Wednesday); [1487] (Thursday). Total: 4 days.

Week beginning 24 July: Bundle, [1519] (Monday); [1521] (Tuesday); [1523] (Wednesday); [1525] (Thursday). Total: 4 days.

Week beginning 31 July: Bundle, [1569] (Monday); [1571] (Tuesday); [1573] (Wednesday); [1575] (Thursday). Total 4 days.

Week beginning 07 Aug: Bundle, [1619] (Monday); [1621] (Tuesday); [1623] (Wednesday); [1625] (Thursday). Total 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1464] (Monday); [1466] (Tuesday); [1468] (Wednesday); [1470] (Thursday). Total: 4 days.

[254]Lev Yakovis:

Bentleigh East Centre

Week beginning 17 July: Bundle, [1489] (Monday); [1491] (Wednesday); [1493] (Friday). Total: 3 days.

Week beginning 24 July: Bundle, [1529] (Monday); [1533] (Wednesday); [1537] (Friday). Total: 3 days.

Week beginning 31 July: Bundle, [1579] (Monday); [1583] (Wednesday); [1587] (Friday). Total: 3 days.

Week beginning 07 Aug: Bundle, [1629] (Monday); [1633] (Wednesday); [1637] (Friday). Total: 3 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1464] (Monday); [1468] (Wednesday); [1472] (Friday). Total: 3 days.

Bentleigh East Centre

Week beginning 17 July:       Bundle, [1485] (Tuesday); [1486] (Wednesday). Total: 2 days.
Week beginning 24 July:       Bundle, [1521] (Tuesday); [1523] (Wednesday). Total: 2 days.
Week beginning 31 July:       Bundle, [1571] (Tuesday); [1573] (Wednesday). Total 2 days.
Week beginning 07 Aug:      Bundle, [1621] (Tuesday); [1623] (Wednesday). Total 2 days.

Bentleigh East Centre

Week beginning 17 July:       Bundle, [1479] (Monday); [1481] (Wednesday); [1482] (Thursday); [1483] (Friday). Total: 4 days.
Week beginning 24 July:       Bundle, [1509] (Monday); [1513] (Wednesday); [1515] (Thursday); [1517] (Friday). Total 4 days.
Week beginning 31 July:       Bundle, [1559] (Monday); [1563] (Wednesday); [1565] (Thursday); [1567] (Friday). Total: 4 days.
Week beginning 07 Aug:      Bundle, [1609] (Monday); [1613] (Wednesday); [1615] (Thursday); [1617] (Friday). Total: 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1458] (Wednesday); [1460] (Thursday); [1462] (Friday). Total: 4 days.

Bentleigh East Centre

Week beginning 17 July:       Bundle, [1479] (Monday); [1480] (Tuesday); [1482] (Thursday); [1483] (Friday). Total: 4 days.
Week beginning 24 July:       Bundle, [1509] (Monday); [1511] (Tuesday); [1515] (Thursday); [1517] (Friday). Total 4 days.
Week beginning 31 July:       Bundle, [1559] (Monday); [1561] (Tuesday); [1565] (Thursday); [1567] (Friday). Total: 4 days.
Week beginning 07 Aug:      Bundle, [1609] (Monday); [1611] (Tuesday); [1615] (Thursday); [1617] (Friday). Total: 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1456] (Tuesday); [1460] (Thursday); [1462] (Friday). Total: 4 days.

Bentleigh East Centre

Week beginning 17 July: Bundle, [1454] (Monday); [1480] (Tuesday); [1482] (Thursday); [1483] (Friday). Total: 4 days.

Week beginning 24 July:       Bundle, [1509] (Monday); [1511] (Tuesday); [1515] (Thursday); [1517] (Friday). Total: 4 days.
Week beginning 31 July:       Bundle, [1559] (Monday); [1561] (Tuesday); [1565] (Thursday); [1567] (Friday). Total: 4 days.
Week beginning 07 Aug:      Bundle, [1609] (Monday); [1611] (Tuesday); [1615] (Thursday); [1617] (Friday). Total: 4 days.

Moorabbin Centre

Week beginning 14 Aug: Bundle, [1454] (Monday); [1456] (Tuesday); [1460] (Thursday); [1462] (Friday). Total: 4 days.

Condition	Party entitled to benefit
…
…
(c)	Finance: Think obtaining sufficient funding by the Due Think Diligence Completion Date to allow Think to pay the Purchase Price on terms and conditions which are satisfactory to Think in its absolute discretion.	Think
…
…
(f)	no Material Adverse Change: as at the Completion Date, there has been no Material Adverse Change since the Agreement Date.	Think
(g)	Due diligence: Think completing legal and operational due diligence investigations to the absolute satisfaction of Think by the Due Diligence Completion Date in respect to the following: (i) the Financial Information; (ii) the Business Records; (iii) the requirements of any Government Agency in respect to the Business, the Premises or the Business Assets; (iv) the Premises Lease and any issues in respect to the Premises; (v) the Authorisations required to operate the Business; (vi) the Employees; and any other matter determined by Think and/or or Think’s Solicitors to be relevant to the acquisition of the Business or the Business Assets.	Think
(h)	Think Board Approval: Think receiving by the Due Think Diligence Completion Date an approval in writing from the board of directors of Think Parent that they consent to this Agreement and the transaction contemplated by it.	Think

[2020] VSC 787

30 November 2020