Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs sought summary judgment for return of $652,787.97 paid for a daycare business, alleging unjust enrichment, misrepresentation, and repudiation after the transaction failed to close.

• Defendants argued there was an enforceable oral agreement and counterclaimed for $168,000 in accreditation costs and $92,837 for rent, utilities, staffing, and operating costs.

• The court examined whether a binding share purchase agreement existed and whether the plaintiffs were entitled to restitution due to non-disclosure, misrepresentation, and failure to finalize the transaction.

• Material non-disclosures by the defendants, including ongoing litigation and the status of business assets and accreditation, were central to the plaintiffs’ claim for rescission and unjust enrichment.

• The court found no enforceable agreement was finalized and that the defendants’ misrepresentations and failures to disclose justified rescission and restitution.

• Judgment was granted in favor of the plaintiffs for $652,787.97 plus prejudgment interest and costs, with the defendants’ counterclaim dismissed.

Background and facts of the case

Tark Issa Salem Khirbesh (“Tark”) and Ousama S S Kabar (“Ousama”), the plaintiffs, sought to purchase a daycare business in Edmonton, Alberta, from Doaa Salah Abde El Naggar (also known as Doaa Alnajjar or Doaa Salah Anajjar) and her companies, 2098981 Alberta Ltd (“209”) and 2098987 Alberta Ltd. Ousama, Tark’s brother-in-law, wished to immigrate to Canada from Libya, and the investment in the daycare was represented as a means to facilitate this process. The parties met in June 2019, and Doaa provided her business card as owner/operator of MJD Daycares Consultants and Builders. The daycare in question was located on Princess Elizabeth Avenue and known as “Kids Village.”

The agreed sale price for the shares of 209 was $630,000, with Doaa committing to assist in managing the business for five months. On July 25, 2019, Tark confirmed Ousama was willing to fund the purchase, and by August 30, 2019, a total of $642,316.97 had been paid by Tark and Ousama to Doaa, 209, or her holding company. An additional $10,471 was paid directly to the landlord on March 7, 2020. The payments were made with the understanding that ownership would be transferred in September 2019, but the transaction was delayed, and the daycare did not open as expected.

In the fall of 2019, Doaa proposed converting the daycare into an Islamic kindergarten, requiring a new Alberta Education accreditation at an estimated cost of $200,000. Doaa claimed Tark agreed to reimburse her for these costs. The daycare opened for business on March 2, 2020. However, the parties could not agree on final terms, including management, allocation of government subsidies, and reimbursement for additional costs. Communications between the parties and their lawyers throughout early 2020 failed to resolve these issues, and Doaa imposed new conditions, including her continued management of the kindergarten through her own company, CACES.

Policy terms and disputed clauses

Draft share purchase agreements were exchanged but never finalized or signed. The agreements included representations that there were no actions or liabilities affecting the corporation and conditions precedent for the purchaser’s benefit, such as satisfactory due diligence and truthful representations. The plaintiffs later discovered that 209 was involved in litigation, including a lawsuit by Kids Village Daycare Ltd for return of a $150,000 deposit, and that the tradename “Kids Village Daycare” was already registered to another entity. Accreditation for the kindergarten was obtained through CACES, a non-profit incorporated by Doaa, not 209.

Legal analysis and outcome

The plaintiffs applied for summary judgment for return of the monies paid and summary dismissal of the defendants’ counterclaim. The court applied the principles from Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49, and considered whether there was a genuine issue requiring a trial.

The court found that no binding share purchase agreement was finalized, as neither the draft provided by Doaa nor the draft provided by the plaintiffs’ lawyer was signed. The oral agreement was fraught with misrepresentations and subsequent modifications. The court found that the plaintiffs’ expectation that ownership would be transferred upon payment was not met, and that the defendants’ non-disclosure of litigation, misrepresentations about the business, and unilateral changes to terms constituted repudiatory breaches and misrepresentation. The plaintiffs were deprived of the benefit they bargained for, and justice required the return of their investment.

The court rejected the defendants’ counterclaim for $168,563.64 in accreditation costs and $92,837 for rent, utilities, staffing, and operating costs, finding no merit since the underlying agreement was not enforceable and the costs were incurred by Doaa’s own company, CACES.

Final disposition

The plaintiffs were awarded judgment against the defendants, jointly and severally, for $652,787.97 (the total amount paid of $642,316.97 plus the March 2020 rent payment of $10,471.00), with prejudgment interest and costs. The defendants’ counterclaim was dismissed. The court held that justice did not permit the defendants to retain the plaintiffs’ money in the absence of a completed and enforceable agreement, and that the plaintiffs were entitled to full restitution.