Engadine Medical Imaging Services Pty Ltd as trustee for the Engadine Unit Trust v Mena Ibrahim

INTRODUCTION

1. These proceedings are brought by the plaintiffs, Engadine Medical Imaging Services Pty Ltd (EMIS) as trustee for the Engadine Unit Trust, Dr Ali Kyatt and Advanced Imaging Pty Ltd as trustee for the Kyatt Family Trust, against various defendants being: 1. Mena Ibrahim (First Defendant); 2. Engadine Medical Imaging Pty Ltd (Second Defendant); 3. Nabeel Chaudhry (Third Defendant); 4. Warilla Diagnostic Imaging Pty Ltd as trustee for Warilla Diagnostic Image Trust trading as Focus Radiology (Fourth Defendant); 5. Focus Radiology Dapto Pty Ltd (Fifth Defendant); 6. Focus Radiology Warrawong Pty Ltd (Sixth Defendant); 7. Dapto Imaging Pty Ltd as trustee for the Dapto Medical Imaging Unit Trust (Seventh Defendant); and 8. Warrawong Imaging Pty Ltd as trustee for the Warrawong Medical Imaging Unit Trust (Eighth Defendant).
2. The scope of the plaintiffs' claims significantly narrowed over the course of the proceedings, particularly during the three-day hearing before me when substantial claims against the defendants were dropped. The narrowing of the claims, however, still involves my consideration of a vast amount of factual material.
3. The allegations and relief now sought by the plaintiffs are contained in the further amended statement of claim (FASOC), which was provided to me in draft form on 16 May 2024 (after the conclusion of the hearing) and which was filed by the plaintiffs on 18 July 2024 pursuant to leave granted by me.
4. In short, the plaintiffs seek relief: 1. in respect of alleged breaches by Mr Chaudhry of duties owed under the Corporations Act 2001 (Cth) and fiduciary duties owed by him as a director to EMIS; 2. in respect of alleged breaches by Mr Ibrahim of duties owed under the Corporations Act and fiduciary duties owed by him as an officer to EMIS; 3. in respect of alleged breaches of confidence by Messrs Chaudhry and Ibrahim; and 4. under the Australian Consumer Law (ACL) in Schedule 2 to the Competition and Consumer Act 2010 (Cth) for misleading or deceptive conduct by Mr Ibrahim.
5. Initially the proceedings involved much wider allegations about an alleged joint venture agreement (JVA) between Dr Kyatt, Mr Ibrahim and Mr Chaudhry in relation to four radiology practices operating in suburbs south of Sydney (the Lakemba Practice, the Dapto Practice, the Warrawong Practice and the Engadine Practice). However, in the course of the hearing before me, the plaintiffs abandoned their allegations regarding the JVA and confined their claims to the parties' relationships and dealings in connection with the Engadine Practice alone. This is very significant in relation to the allegations which remained in the proceedings because all of the factual allegations concerning the ownership, operation and management of the Lakemba Practice, the Dapto Practice and the Warrawong Practice were specifically removed from the FASOC.
6. The defendants contest the existence of the remaining alleged obligations which the plaintiffs contend have been breached. Mr Ibrahim filed his defence on 24 August 2023 (Mr Ibrahim's defence) and Mr Chaudhry filed his defence on 16 August 2023 (Mr Chaudhry's defence).
7. I note that no claims against Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging or Warrawong Imaging are pressed. On 15 May 2024, I made orders dismissing the proceedings against Warilla Diagnostic Imaging, with costs reserved. Although the FASOC sets out relief claimed against Engadine Medical Imaging (at prayers 12-18), the plaintiffs' written submissions in closing state that those remedies do not require my attention, for reasons to do with a Deed of Settlement and Release dated 23 February 2023 between Engadine Medical Imaging, Mr Ibrahim, EMIS and Dr Kyatt, the precise terms and implications of which are detailed below, and the effect of which is that whether the claim against Mr Ibrahim succeeds or fails, the relief claimed against Engadine Medical Imaging will be either otiose (in the former case) or unavailable (in the latter). On that basis, I will also dismiss the proceedings against Engadine Medical Imaging, Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging and Warrawong Imaging.
8. Accordingly, this judgment only addresses the claims against Messrs Ibrahim and Chaudhry which are limited to their involvement with EMIS. The substantive issues that I am required to determine are as follows: 1. whether Mr Ibrahim was an officer of EMIS, and, if so, whether he breached duties owed by him to EMIS as an officer of EMIS; 2. whether Mr Chaudhry, as a director of EMIS, breached his duties to EMIS; 3. whether Messrs Ibrahim and Chaudhry misused confidential information; and 4. whether there are any grounds under the ACL for setting aside the Deed of Settlement (in whole or in part).

EVIDENCE

1. At the hearing, EMIS, Dr Kyatt and Advanced Imaging relied on evidence from Dr Kyatt and Ameer Al-Khigani, a business associate of Dr Kyatt.
2. Neither Mr Ibrahim nor Mr Chaudhry read any affidavits, gave evidence or called any witnesses in the proceedings. On this basis the plaintiffs ask that I draw a Jones v Dunkel inference in respect of their failure to give evidence as well as their failure to call Dannielle Coles as a witness in their respective cases. I have addressed the issue of the Jones v Dunkel inferences in more detail below.
3. Mr M Pesman SC appeared with Mr M Klooster for EMIS, Dr Kyatt and Advanced Imaging, instructed by New South Lawyers. Mr M Condon SC appeared with Mr M Collins for Mr Ibrahim, instructed by Bridges Lawyers. Mr G Sirtes SC appeared with Mr F Di Lizia for Mr Chaudhry, instructed by Madison Marcus.

Dr Kyatt's evidence

1. At the hearing, Dr Kyatt was cross-examined by Mr Condon SC and Mr Sirtes SC on multiple issues.
2. The approach of a trial judge to the assessment of the credibility and reliability of a witness who gives evidence in a trial has a number of aspects which are relevant to these proceedings. The salient principles are as follows: 1. In circumstances where events have taken place long ago, the orthodox and sensible approach for a trial judge to take in assessing the credibility and reliability of the evidence of a witness about those events is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence: Effem Foods Pty Limited v Lake Cumbeline Pty Limited [1999] HCA 15; (1999) 161 ALR 599, Gleeson CJ, Gaudron, Kirby and Hayne JJ at [15]-[16]. 2. Scientific research has cast doubt on the ability of a trial judge to tell truth from falsehood accurately based on the appearance of witnesses such that trial judges should limit their reliance on the appearances of witnesses and reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, Gleeson CJ, Gummow and Kirby JJ at [30]-[31]. 3. There are multiple problems with a trial judge making demeanour findings, ranging from systematic error or bias, memory malfunctions, and the possibility that witnesses may be dishonest about only parts of their evidence, that a truthful witness may give accurate or inaccurate testimony and that a dishonest witness may appear to be truthful. A trial judge should keep in mind the guidance provided in Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 by Ipp JA (with whom Mason P and Tobias JA agreed) who said at [27]: These problems and doubts about demeanour findings explain why trial judges are expected to weigh their impressions as to demeanour carefully against the probabilities and to examine whether the disputed evidence is consistent with the incontrovertible facts, facts that are not in dispute and other relevant evidence in the case. Of course, demeanour may trump the probabilities, but it should be apparent from the judge's reasons that the probabilities and consistency with other relevant evidence have properly been taken into account. 1. A trial judge should exercise restraint when forming a view about the credibility of a witness based on demeanour in giving evidence because it is a stressful and unfamiliar experience for most people, and particular care must be exercised in making demeanour findings where a witness is from a different cultural and ethnic background to that with which the trial judge is familiar: Goodrich, Ipp JA at [21]. As observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") (1924) 20 Ll L Rep 140, by Atkin LJ at 152 (cited in Fox v Percy at [30]): … an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour. 1. The assessment of the credibility of a witness is a larger concept than demeanour and the latter is not to be overemphasised: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2020] NSWCA 277, Bell P (as the Chief Justice then was) at [106] citing Goodrich at [16]-[27] (White JA agreeing generally at [155]-[156]); Admiral International Pty Ltd v Insurance Australia Ltd [2022] NSWCA 277, Bell CJ (Ward P and Macfarlan JA agreeing) at [102]-[103], citing White and Goodrich. 2. It is important to bear in mind that the ordinary human experience of a witness makes their memory of conversations fallible, as eloquently stated in the following oft-cited passage in Watson v Foxman (1995) 49 NSWLR 315, by McLelland CJ in Eq at 319 (recently approved in Touma v Highfields Australia Pty Ltd [2024] NSWCA 160, Basten AJA at [18] White and Adamson JJA agreeing): … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Jones v Dunkel inference against the defendants

1. The rule in Jones v Dunkel (1959) 101 CLR 298, being the principle articulated by Kitto J at 308, Menzies J at 312 and Windeyer J at 320-321, has been distilled, summarised, expanded and explained in a number of authorities in the High Court of Australia and the Court of Appeal of this court, principally including Payne v Parker [1976] 1 NSWLR 191, Glass JA at 201; Manly Council v Byrne [2004] NSWCA 123, Campbell J (Beazley JA and Pearlman AJA agreeing) at [44]-[61]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, Heydon, Crennan and Bell JJ at [63]; Ling v Pang [2023] NSWCA 112, Kirk JA (Leeming and Mitchelmore JJA agreeing) at [20]-[28]; SSABR Pty Ltd v AMA Group Limited [2024] NSWCA 175, Stern JA (Ward P and Price AJA agreeing) at [158]-[161]. These authorities support the following legal principles: 1. The rule in Jones v Dunkel is a principle of judicial reasoning which addresses the drawing of inferences of fact. 2. The unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. 3. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. 4. The drawing of a Jones v Dunkel inference requires the court to be satisfied that, first, it is expected or natural for the party in question to have called the person; second, the person's evidence would have elucidated a particular matter; and third, the absence of the person is unexplained. 5. The rule in Jones v Dunkel only applies once all the evidence in the case is in. 6. Whether some inference should be drawn, what inference, and with what significance, are all matters that depend upon the particular case. 7. In some cases no inference will be drawn merely because corroborative or cumulative witnesses are not called. 8. The rule in Jones v Dunkel cannot be used to draw a positive inference if the evidence does not otherwise admit of a rationally drawn inference. 9. The rule in Jones v Dunkel does not permit a court to infer that the uncalled evidence would have been positively damaging to a party's case. 10. The rule in Jones v Dunkel does not supply missing gaps in the evidence.

Mr Chaudhry, Mr Ibrahim and Dr Kyatt: initial relationships and discussions

1. In around mid 2011, Dr Kyatt (a radiologist) and Mr Chaudhry (a sonographer) first met. At this time, Dr Kyatt was living in Griffith, New South Wales, and working for I-MED Radiology. Mr Chaudhry introduced Dr Kyatt to Mr Chaudhry's business partner, Shahid Iqbal. Mr Chaudhry mentioned to Dr Kyatt that they were considering opening a radiology practice in Griffith and asked if Dr Kyatt would like to join them. Dr Kyatt declined to be involved.
2. On 21 September 2011, Mr Chaudhry sent an email to Dr Kyatt reiterating that they were seriously considering establishing a radiology practice in Griffith, and potentially expanding into the surrounding rural areas, and said that they were happy to offer Dr Kyatt the same wage as he was currently getting plus 10% of the profits with no need for Dr Kyatt to make any financial input. To Dr Kyatt's knowledge, that proposed business venture involving Messrs Chaudhry and Iqbal did not go ahead.
3. In or around 2015, Mr Chaudhry called Dr Kyatt and requested his assistance with performing certain medical procedures, including nerve root injections, performing biopsies under ultrasound guidance and joint injections, at a practice that Mr Chaudhry operated, jointly with a neurologist, in Kingswood, New South Wales (Kingswood Practice). Dr Kyatt subsequently performed work as a contractor at the Kingswood Practice on several occasions on weekends.
4. On 11 May 2015, Mr Chaudhry sent an email to Dr Kyatt in which he said he would like to offer Dr Kyatt a proposal to come and work at the Kingswood Practice, that they were able to match what Dr Kyatt was on in Griffith and that they could even give him equity in the businesses. Mr Chaudhry asked Dr Kyatt to let him know if he was interested and said that they could meet up and discuss further.
5. In about November 2015, Dr Kyatt was approached by Mr Chaudhry and Mr Ibrahim, who offered him employment at their three radiology practices in the Sutherland Shire and Illawarra areas, in the suburbs of Engadine, Warilla and Woonona. In an email dated 8 November 2015 to Dr Kyatt, Mr Chaudhry said that with Dr Kyatt working with Mr Chaudhry and Mr Ibrahim, they could grow and expand in the future. In the letter dated 8 November 2015 on the letterhead of Woonona Medical Imaging which was attached to that email, Mr Chaudhry formally offered Dr Kyatt employment as a radiologist working at each of the Engadine Practice, the Warilla Practice and the Woonona Practice at a daily rate of $3,800 inclusive of GST. The term of the employment was expressed to be "until Dr Ali Kyatt needs to leave for overseas". The letter also included the following statement under the sub-heading "Equity Partnership": If everything progresses well and if you don't end up leaving overseas, we are also happy to discuss an equity partnership in all 3 practices.

The Engadine Practice and the Engadine Premises

1. In 2009, the Engadine Practice was established by Mr Ibrahim and was conducted by Advanced Medical Imaging Pty Ltd (AMIS, which later changed its name to Advanced Medical Fitouts Pty Ltd), of which Mr Ibrahim was the sole director and shareholder. As a result, Mr Ibrahim was managing the Engadine Practice from that time until the events of February 2018 which are outlined below.
2. In around April 2016, Dr Kyatt was provided with access to the financial books and records of the Engadine Practice for the 2013, 2014 and 2015 financial years.
3. On 23 June 2016, EMIS was incorporated, with Dr Kyatt as its sole director and secretary and Advanced Imaging as its sole shareholder. Dr Kyatt is the sole director of Advanced Imaging and Dr Kyatt and his wife are the equal shareholders of Advanced Imaging.
4. On 1 February 2017, the Lease of premises at Suite 3/24-28 Station St, Engadine (Engadine Premises) was entered into between Peter and Robyn Thompson (as lessors) and Pulse Medical Imaging Engadine Services Pty Ltd (as lessee). Pulse Medical was a company controlled by Messrs Ibrahim and Chaudhry. The Lease was signed by Messrs Ibrahim and Chaudhry on behalf of Pulse Medical.
5. The Lease had a commencement date of 1 February 2017 and a termination date of 31 January 2022. The Lease included an option to renew for a further five-year term, which had to be exercised within a period of three months before the expiry of the Lease, namely by 31 October 2021. I infer that as signatories to the Lease, each of Messrs Ibrahim and Chaudhry knew that the option had to be exercised under the Lease by 31 October 2021 and that the Lease expired on 31 January 2022.
6. In October 2017, negotiations resumed concerning the potential acquisition by Dr Kyatt of an interest in the radiology practices owned and operated by Messrs Chaudhry and Ibrahim, the Engadine Practice in particular. Dr Kyatt offered to buy a 51% interest in the Engadine Practice and considered it was important for him to have a majority interest in that business and that he would handle the day-to-day management of it.
7. On 30 October 2017 at 11:52pm, Mr Chaudhry sent an email to Rizwan Inayat (an accountant for Dr Kyatt who attended a meeting on 28 October 2017 between Dr Kyatt, Mr Chaudhry and Mr Ibrahim), copied to Dr Kyatt, Mr Ibrahim and Imran Khan (the solicitor for Messrs Chaudhry and Ibrahim). Mr Chaudhry's email forwarded (and expressed approval in answer to) an email sent earlier that evening at 6:46pm by Mr Inayat, which stated that Dr Kyatt, Mr Chaudhry and Mr Ibrahim contemplated having a shareholders agreement with the following main points: 1. Dr Kyatt would be in full control of the day-to-day management of the business of the Engadine Practice and make all decisions from a management and strategic point of view with respect to it. 2. Dr Kyatt would not receive any "management fees" in relation to managing the business. 3. Dr Kyatt, when called upon to provide his services as a radiologist, would charge based on what a normal radiologist charges. 4. Mr Chaudhry would work in the Engadine Practice and earn a salary based on his then existing rate. 5. In the event that Mr Chaudhry and/or Mr Ibrahim decided to sell their shares in the Engadine Practice, Dr Kyatt would have the first right to purchase those shares, and if Dr Kyatt determined not to exercise that option, Mr Chaudhry and Mr Ibrahim would be entitled to sell their shares to any passive investor. 6. In the event that Dr Kyatt decided to sell his shares in the Engadine Practice, both Mr Chaudhry and Mr Ibrahim would have the first right to purchase those shares, and if Mr Chaudhry and Mr Ibrahim determined not to exercise that option, Dr Kyatt would be entitled to sell his shares to anyone. 7. Shares in the Engadine Practice would be sold at market value based on market valuation undertaken by an independent valuer. 8. The person selling their shares would be responsible for paying the valuer and any legal fees associated with the sale of their shares. 9. Dr Kyatt would be the sole director of the new company through which the Engadine Practice would run. 10. Messrs Chaudhry and Ibrahim would have full access to the new company's financial records and accounts.

Engadine Imaging Trust

1. In about early February 2018, after lengthy negotiations, Dr Kyatt had a meeting with Mr Chaudhry and Mr Ibrahim in which Dr Kyatt said he was prepared to pay $319,000 for a majority stake in the Engadine Practice, saying that he would like a 51% interest in it and ultimate control of the company. Each of Mr Chaudhry and Mr Ibrahim agreed.
2. On 1 February 2018, the Engadine Imaging Trust (a unit trust) was created, pursuant to a deed (Engadine Trust Deed) executed between Advanced Imaging as trustee for the Kyatt Family Trust, Chaudhry Radiology Services Pty Ltd as trustee for the Nabeel Chaudhry Family Trust, MI No. 2 Family Pty Ltd as trustee for the MI No. 2 Family Trust (an entity associated with Mr Ibrahim) and EMIS.
3. The Engadine Trust Deed, which provided that EMIS would be trustee of the Engadine Imaging Trust, was executed by Dr Kyatt, Mr Chaudhry and Mr Ibrahim, on behalf of their respective unit holders of a total of 100 units in the Engadine Imaging Trust, as follows: 1. Dr Kyatt as director of Advanced Imaging, which would hold 51 units as trustee for the Kyatt Family Trust; 2. Mr Chaudhry as director of Chaudhry Radiology Services, which would hold 19 units as trustee for the Nabeel Chaudhry Family Trust; and 3. Mr Ibrahim as director of MI No. 2, which would hold 30 units as trustee for the MI No. 2 Family Trust.
4. The Engadine Trust Deed was also executed by Dr Kyatt on behalf of EMIS as its director and secretary.
5. Under the Engadine Trust Deed, EMIS had the power to institute, set up and administer the Engadine Practice, being the radiology practice known as Engadine Imaging (cl 21.1(a)). The "business" was defined in the Engadine Trust Deed as the radiology practice situated at the Engadine Premises or such other location as agreed by EMIS (cl 1.1(b)).
6. The Engadine Trust Deed also provides that there is no relationship of principal and agent between EMIS and the unit holders, no relationship of partners as between EMIS and the unit holders and no relationship of partners as between the unit holders amongst themselves (cl 19.1). In addition, the Engadine Trust Deed provides that no unit holder is under any obligation to personally indemnify EMIS or any creditor of EMIS in the event of there being any deficiency of the assets of the Engadine Imaging Trust as compared to its liabilities (cl 19.2).

Transfer of the Engadine Premises and assignment of the Lease to EMIS

1. On 22 February 2018, Mr Inayat sent an email to All Star Property Group, the managing agent for the lessor of the Engadine Premises, introducing himself and stating that he acted as the accountant for EMIS and was responsible for all the payments. In the email, Mr Inayat asked that all correspondence be sent to his email address and also provided his mobile number.
2. On 23 February 2018, Nicole Hartnett of All Star Property Group replied by email to Mr Inayat stating that she had updated their system to include him as the main contact in relation to the Lease.
3. In February 2018, the Engadine Premises were transferred from Peter and Robyn Thompson to new owners, Don and Helen Zafiropoulos, who bought the Engadine Premises subject to the Lease.
4. In May 2018, Pulse Medical assigned the Lease of the Engadine Premises to EMIS.
5. At all relevant times, the Engadine Practice traded from the Engadine Premises.

Establishing the Dapto Practice

1. In September 2018, Dr Kyatt, Messrs Ibrahim and Chaudhry and Dr Haider Jasim (a general practitioner) had discussions about establishing a radiology practice in Dapto. Those exchanges took place at least in part via WhatsApp messaging and email. Among the matters discussed was the presence of an existing radiology practice in Dapto.
2. In late September 2018, Dr Kyatt, Messrs Ibrahim and Chaudhry, and Dr Jasim exchanged WhatsApp messages in the course of which: 1. Mr Chaudhry suggested that they should directly approach the staff at the existing radiology practice in Dapto and offer them contracts, saying '[t]his way we will close them down"; 2. Mr Ibrahim agreed, stating "[w]e have to close them down and the only way to do that is through their staff"; 3. Dr Jasim agreed, saying "[y]es it should be done ASAP currently they are struggling with staff to keep the unit going!! I am watching them carefully and closely, we should close them off soon"; and 4. Dr Kyatt indicated that he had obtained advice from someone called "Terry" (who is referred to only by his first name), who advised him to advertise roles at the Dapto Practice and "not to approach the staff directly".
3. On 25 September 2018, Mr Chaudhry sent an email to Dr Kyatt, Mr Ibrahim and Dr Jasim, attached to which was a spreadsheet setting out the prospective pay rates and total expense of hiring six members of staff from the existing practice in Dapto. In the body of the email, Mr Chaudhry stated: … I have attached the expense that will occur by taking the dapto staff. I believe by taking the staff, it will cripple Dapto and they will not be able to operate.
4. One of the members of the staff in the existing practice in Dapto listed on the spreadsheet was "Danielle Coles" (her correct first name is "Dannielle").

2019 financial position of EMIS

1. On 6 February 2019, Mr Inayat sent an email to Dr Kyatt, Mr Ibrahim and Mr Chaudhry in which he said there was a fair bit of money in Engadine and he was proposing that $50,000 be taken out as profit share. Mr Inayat said that he would transfer the $50,000 according to the percentage of units held by each unitholder and asked for them to confirm their bank account details.
2. On 19 April 2019, Mr Inayat sent an email to Dr Kyatt, Mr Ibrahim and Mr Chaudhry in which he said there was quite a fair bit of money sitting in the Engadine account so they had decided to take a $150,000 profit share. Mr Inayat said that because Dr Kyatt had 51% of the shares he would take $76,500 as profit share. Mr Inayat said that each of Mr Ibrahim and Mr Chaudhry should take out their share based on the percentage of shares they had in the business.
3. The financial statements for EMIS for the year ending 30 June 2019 show that the total income was $1,505,173.49 and total expenses were $1,561,054.14 (including a consulting fee of $136,363.64), making the net loss of $55,880.65. Those financial statements also demonstrate that there was a total equity deficiency of $61,119.40. Dr Kyatt saw these financial statements at the end of that financial year (T85).
4. The plaintiffs submit that despite the recording of a net loss, the financial statements for the year ending 30 June 2019 reveal that the Engadine Practice was profitable because the unit holders took out their profit share in the form of the consulting fee of $136,363.64 which, when added back to the net loss of $55,880.65, reveals a net profit of $80,482.99. They also say that Dr Kyatt's 51% share of the consultancy fee was $69,545.46.

Dr Kyatt's relocation to Jordan and changes to the Engadine Practice

1. In mid-2019, some time prior to July 2019, Dr Kyatt informed Mr Chaudhry that he was relocating overseas. Although the evidence shows that Dr Kyatt had mentioned a proposed relocation overseas during discussions in November 2015 with Messrs Ibrahim and Chaudhry about an earlier business negotiation, Dr Kyatt did not tell Mr Ibrahim or Mr Chaudhry of his intention to leave for Jordan any earlier than mid-2019 and it came as a surprise to them (T137-138).
2. On 24 July 2019, Dr Kyatt, Dr Jasim, Mr Chaudhry, Mr Ibrahim and Roz Rhoden (the Business Development Manager of Southern Imaging Group) held a meeting at the Novotel at which a number of issues were discussed. The minutes of the meeting were taken by Ms Roden and then emailed by her to all of the other participants on 5 August 2019.
3. In the minutes of the meeting, Mr Ibrahim is recorded as discussing with Dr Kyatt: … if the Engadine rooms need to expand and there is a shop for lease 3 doors down from the current site. This will allow for future growth as they are outgrowing the current site.
4. Below this entry, the minutes record "Dr Kyatt considering".
5. The minutes of the meeting also state: Discussion: who will be in control when Dr Kyatt goes away No response or decision made. Dr Kyatt would like to put forward Dr Jasim as a director (for internal communication and management only)
6. The minutes also contain a record of discussion about issues concerning the Dapto Practice and the Warrawong Practice, such as whether an MRI machine and a 3D mammogram machine should be purchased for the Dapto Practice, the anticipated arrival of a bone density machine that had been ordered, whether a female radiologist should be offered shares in the various practices, whether Dr Kyatt and Dr Jasim wished to buy into the practices at Woonona and Warilla and various staffing issues such as the hiring of a marketer and an operational manager.
7. On 26 September 2019, Mr Chaudhry was appointed as a second director and secretary of EMIS. Dr Kyatt remained a director and secretary of EMIS.
8. In October 2019, Dr Kyatt moved from Sydney to Jordan for family reasons. Dr Kyatt had access to the Engadine Practice bank account and could monitor the financial performance of the Engadine Practice to the extent it was disclosed in the bank account statements. Dr Kyatt also communicated frequently with Mr Inayat as his own accountant and the accountant for EMIS. Over the following month, Dr Kyatt continued to provide reporting services remotely to the Engadine Practice.

Pay rise approved for Dannielle Coles

1. On 7 February 2020, Dannielle Coles sent an email to Mr Chaudhry requesting a pay rise due to her job role and working hours increasing.
2. On 11 February 2020, Mr Chaudhry sent an email to Dr Kyatt, Mr Ibrahim and Ms Rhoden, forwarding Ms Coles' email of 7 February 2020 and expressing his approval to give Ms Coles a pay rise, stating "she is a massive asset to the company".
3. On 14 February 2020, Ms Rhoden (signing off as Business Development Manager, Southern Imaging Group) responded by email to Mr Chaudhry, copied to Dr Kyatt and Mr Ibrahim, agreeing to the proposed pay rise for Ms Coles.

Mr Ibrahim's access to the books and records of the Engadine Practice

1. On 12 March 2020, Mr Ibrahim sent an email to Mr Inayat, the accountant for EMIS, requesting access to the Xero (accounting software) account for the Engadine Practice. Mr Inayat subsequently sent Mr Ibrahim a Xero invitation.
2. From this time, Mr Ibrahim had unrestricted access to the books and records of the Engadine Practice.

2020 financial position of EMIS

1. On 1 March 2020, Mr Inayat sent an email to Dr Kyatt, Mr Chaudhry and Mr Ibrahim saying that he had had a chat with Dr Kyatt on the weekend and since there was $150,000 sitting in Engadine they thought it would be a good idea to take some money out as a profit share. Mr Inayat said that they were thinking of taking out $100,000, Dr Kyatt would take out $51,000 and the remainder could be taken out by each of Mr Chaudhry and Mr Ibrahim based on their percentages.
2. On 12 March 2020, Mr Inayat sent an email to Dr Kyatt, Mr Chaudhry and Mr Ibrahim saying that the money that Dr Kyatt had withdrawn would be classified as a consulting fee for radiology work and expensed in the accounts for EMIS and that the profit share to be taken out by each of Mr Ibrahim and Mr Chaudhry would also get classified as a consulting fee in the books of EMIS.
3. The financial statements for EMIS for the year ending 30 June 2020 show that the total income was $1,407,461.30 and total expenses were $1,429,435.88 (including a consulting fee of $240,909.09), making the net loss of $21,974.58. Those financial statements also demonstrate that there was a total equity deficiency of $83,093.98. Dr Kyatt saw these financial statements at the end of that financial year (T85).
4. The plaintiffs submit that despite the recording of a net loss, the financial statements for the year ending 30 June 2020 demonstrate that the Engadine Practice was profitable because the unit holders took out their profit share in the form of the consulting fee of $240,909.00 which, when added back to the net loss of $21,974.58, reveals a net profit of $218,934.42. They also say that Dr Kyatt's 51% share of the consultancy fee was $122,863.59.

Rent deferral at the Engadine Practice during the COVID-19 pandemic

1. On 22 June 2020 and 5 August 2020, Mr Inayat sent emails to Messrs Ibrahim and Chaudhry and Dr Kyatt concerning the proposed deferral and/or waiver of rental payments for the Engadine Premises from the lessor during the COVID-19 pandemic, with the lessor chasing the rent for the Engadine Premises and offering a 10% waiver of the rent for two months and Mr Inayat planning to go back with a 20% waiver for 6 months starting in April 2020. On 5 August 2020, each of Messrs Chaudhry and Ibrahim sent an email to Mr Inayat asking him to negotiate the waiver.
2. I infer from this exchange that each of Messrs Chaudhry and Ibrahim were involved in a decision concerning the rent paid by EMIS for the Engadine Premises under the Lease.

Dr Kyatt's employment at I-MED

1. On 14 April 2021, Dr Kyatt and Mr Chaudhry had the following exchange over WhatsApp: Dr Kyatt: Salam nabeel Sorry I just started a new job for imed and currently very busy. Mr Chaudhry: Salam Ali, no problems
2. In cross-examination (T60-62), Dr Kyatt said that he commenced providing remote radiology services to I-MED in April 2021, which he estimated he did for about one year, involving him working three to four hours a day, maybe two to three shifts a week. Dr Kyatt said that I-MED is the largest radiology practice in Australia and the cases he reported on came from all over Australia, other than Sydney and Wollongong.

Distribution of funds from the Engadine Practice

1. On 28 January 2021, Mr Ibrahim sent an email to Dr Kyatt and Mr Chaudhry, copied to Mr Inayat, stating: Regarding Engadine, I believe we should begin to distribute shareholders funds weekly. I propose that we take out $300,000.00 this week, then distribute $3,000 every Friday (divided according to each shareholder's portion). Please let me know your thoughts.
2. There is no evidence of what, if any, action was taken in response to this suggestion by Mr Ibrahim. In any event, the distribution of the income of the Engadine Imaging Trust was entirely the decision of Advanced Imaging under cl 10.3(a) of the Engadine Trust Deed and not something over which Mr Ibrahim had any control.

Termination of employment of staff member at the Engadine Practice

1. On 2 May 2021, Mr Ibrahim sent an email with an attached letter to Jong Min Son, an employee of the Engadine Practice, copied to Mr Chaudhry. That letter, on the letterhead of Pulse Medical Imaging, concerned the termination of Jong Min Son's employment with the Engadine Practice.
2. Under the heading 'Termination of Your Employment', the text of the letter relevantly stated: Dear Mr Jong Min Son, I am writing to you concerning the termination of your employment with Engadine Medical Imaging. Your employment is being terminated due to serious misconduct due to the following two incidents: [The letter then set out factual matters concerning a patient receiving the wrong procedure and Jong Min Son going home early] The incidents as mentioned above constitute a serious and imminent risk to the health and safety of our patients, in addition to risking the reputation and viability of the business. Your termination is effective immediately as of today's date … … Yours sincerely Mena Ibrahim
3. I infer that Mr Ibrahim had to investigate and establish what had taken place before sending the notice of termination. There is no evidence that Mr Ibrahim consulted with either Dr Kyatt or Mr Chaudhry before taking the step of terminating the employment of Jong Min Son, although I infer from the copying in of Mr Chaudhry to the email that the termination did not come as a surprise to him.
4. There is evidence that on 2 September 2022 the original recipient of the email, Jong Min Son, forwarded to Dr Kyatt the email of 2 May 2021.

2021 financial position of EMIS

1. The financial statements for EMIS for the year ending 30 June 2021 show that the total income was $1,591,392.57 and total expenses were $1,559,148.99 (including a consulting fee of $450,000), making the net profit of $32,243.58. Those financial statements also demonstrate that there was a total equity deficiency of $50,850.40. Dr Kyatt saw these financial statements at the end of that financial year (T85).
2. The plaintiffs submit that despite the recording of the small net profit, the financial statements for the year ending 30 June 2021 demonstrate that the Engadine Practice was more profitable that it appears because the unit holders took out their profit share in the form of the consulting fee of $450,000.00 which, when added back to the net profit of $32,243.58, shows a greater net profit of $482,243.58. They also say that Dr Kyatt's 51% share of the consultancy fee was $229,500.00.

Attempts to renew the Lease

1. On 17 August 2021 at 1:39pm, Mr Chaudhry sent an email to Paula Milsted, the Property Administrator of All Star Property Group, asking for an update on the time remaining for the Lease in respect of the Engadine Premises.
2. On 17 August 2021 at 2:00pm, Ms Milsted sent an email to Mr Chaudhry in reply, stating that the Lease was due to expire on 31 January 2022.
3. On 17 August 2021 at 9:35pm, Mr Chaudhry forwarded Ms Milsted's response to Mr Ibrahim, asking Mr Ibrahim what he wanted Mr Chaudhry to reply with.
4. On 18 August 2021 at 12:01pm, Mr Ibrahim emailed Mr Chaudhry with a draft response to Ms Milsted in the following form: Hi Paula, Please advise the landlord that I would like to enter into a 5+4+4+4 year lease from 31 January 2022. I will pay the landlord's legal fees for preparing the new lease. Thank you.
5. On 18 August 2021 at 12:10pm, Mr Chaudhry sent an email to Ms Milsted in the precise form of the draft suggested by Mr Ibrahim.
6. On 18 August 2021 at 12:42pm, Ms Milsted replied to Mr Chaudhry, stating that she would pass on his correspondence to the lessors and would be in touch with the suggested terms in the future.
7. On 8 September 2021, Ms Milsted sent an email to one of the lessors of the Engadine Premises, Don Zafiropoulos, in the following form: Lease to Engadine Medical Imaging Services Pty Ltd Premises: Suite 3, 24 Station Street, Engadine NSW Lease Expiry: 31.01.2021 We refer you to the above tenant who has advised they would like to renew their lease for a term of five years with 3 x 4 year options. We have reviewed the rent and [propose] the following Lease commencement 1 February 2022 Term Five (5) years Option 3 x 4 year options Commencement Rent $63,621.96 per annum PLUS GST / $5,301.83 per month PLUS GST Rent Reviews Annually at anniversary via CPI/4% greater of Market Review at Option 100% as per existing lease - Council Outgoings - Water Rates - Tax's - Strata levis /fees Security Deposit $15,248.97 - held by yourself A top amount of $2,247.06 will be required Lease Preparation Cost Payable by the lessee as charged by the appointed solicitor.

If you are in agreement to the above, you may simply reply back to this email, we will then advise the tenant of the [proposed] new rent and request your solicitor prepare the necessary lease agreement. If how however [sic] you wish to discuss please do not hesitate to contact our office. Could you please confirm your solicitors details.

1. On 13 October 2021, Abbey Freeman (the Leasing Administrator of All Star Property Group) sent an email to Mr Inayat noting that the Lease for the Engadine Premises was due to expire on 31 January 2022 and asking whether he intended to renew the Lease or continue to occupy the Engadine Premises and if so, what length of lease he was interested in securing with the lessors. Ms Freeman concluded by asking Mr Inayat to provide a prompt reply, as if he did not wish to renew they would need to market the Engadine Premises to secure a replacement tenant for the lessors.
2. On 14 October 2021 at 8:18am, Mr Inayat forwarded Ms Freeman's email of 13 October 2021 to Mr Chaudhry, Mr Ibrahim and Dr Kyatt, saying: Guys Please refer below lease renewal for Engadine
3. On 14 October 2021 at 8:20am, Mr Inayat sent an email responding to Ms Freeman, stating that his firm acted as the accountants, he had passed on her email to the client, and that he would ensure that they would get back to her as soon as possible.
4. Also on 14 October 2021 at 8:20am, Mr Inayat sent an email to Dr Kyatt asking if he wanted to discuss the Lease renewal further and suggesting that Dr Kyatt speak with Mr Chaudhry to discuss the terms of renewal. On the same day at 5:36pm, Dr Kyatt sent an email in reply to Mr Inayat stating: Yes, Rizwan for me certainly. Just see what others' ideas.
5. On 31 October 2021, the period within which the option to renew the Lease of the Engadine Premises could be exercised expired.
6. On 25 November 2021 at 3:27pm, Mr Chaudhry sent an email to Mr Inayat, in reply to Mr Inayat's email of 14 October 2021 at 8:18pm forwarding Ms Freeman's email of 13 October 2021. In that email, Mr Chaudhry said: Salam Bro, Did you send an email to renew the lease? Lets [sic] do a 4 x 4 x 4 x 4 year lease.
7. On 25 November 2021 at 3:46pm, Mr Inayat then sent the following email to Ms Freeman, copied to Mr Chaudhry: Abbey Hope you are well. We would like to renew the lease ca [sic] we renew as follows: 4 x 4 x 4 x 4 lease.

1. I infer from the matters contained in Ms Milsted's email of 12:32pm that between 12:00pm and 12:32pm, Mr Ibrahim spoke to Ms Milsted to provide her with additional details about the proposed terms of the new lease.
2. On 28 February 2022 at 4:40pm, the lawyers for the lessors of the Engadine Premises, GA Lawyers, sent an email to Ms Milsted confirming that Mr Zafiropoulos had instructed them to prepare the new lease document and asking her to confirm what the rent was prior to 1 February 2022 and what the rent increased to on 1 February.
3. On 14 March 2022, GA Lawyers sent Ms Milsted a draft of the new lease with a commencing date of 1 February 2022, a terminating date of 31 January 2026 and 3 x 4 year option periods, which named Logan Medical Imaging as the lessee, Mr Ibrahim as the guarantor, and provided for Messrs Ibrahim and Chaudhry as the directors of Logan Medical Imaging to sign on the execution page.
4. For reasons not disclosed by the evidence, this proposed leasing transaction did not proceed.

Incorporation of Engadine Medical Imaging

1. On 21 March 2022, Engadine Medical Imaging (the second defendant in these proceedings) was incorporated, with Mr Ibrahim as its sole director, secretary and shareholder. The difference between the full names of Engadine Medical Imaging and EMIS (Engadine Medical Imaging Services) is that the latter includes the word "Services" and the former does not.

Focus Radiology rebranding

1. In around May 2022, steps were commenced to rebrand and bring the Woonona Practice, the Warrawong Practice, the Warilla Practice, the Dapto Practice and the Engadine Practice, all previously part of Southern Imaging Group (SIG) and/or Pulse Medical Imaging, under the umbrella business name of 'Focus Radiology Group'. The evidence indicates that the rebranding process was embarked upon by Mr Chaudhry, unbeknownst to Dr Kyatt, and substantially with the assistance of Ms Coles who was working for the businesses using SIG and/or Pulse Medical Imaging as their trading names.
2. Ms Coles is a former staff member at the previous Dapto radiology practice, who appears to have commenced employment either with the Dapto Practice upon its establishment jointly by Mr Ibrahim, Mr Chaudhry, Dr Kyatt and Dr Jasim, or with one or more associated entities controlled by Mr Chaudhry and/or Mr Ibrahim and forming part of SIG. Before the change to Focus Radiology, her email address was dcoles@sig.health and her email sign off was: Dannielle Coles Southern Imaging Group Pulse Medical Imaging
3. On 30 May 2022, Ms Coles sent an email to Chris Germon, a consultant at Crowd IT, copied to Mr Chaudhry, in which she requested that the following, among other items, be actioned by the end of July 2022: 1. new email accounts created for each of the Woonona Practice, the Warrawong Practice, the Warilla Practice, the Dapto Practice and the Engadine Practice, in the form '[suburb name]@focusrad.com.au'; 2. new staff email accounts created for herself and Mr Chaudhry; 3. new website URL (www.focusrad.com.au) to be confirmed and created; and 4. the telephone introduction and out-of-hours messages for each of the practices to be amended to refer to Focus Radiology.
4. Throughout June 2022 and into July 2022, Ms Coles had further email correspondence in connection with the rebranding process with Mr Germon of Crowd IT to find out how it was progressing, as well as with professional design and printing services engaged to design and/or supply, inter alia, Focus Radiology letterheads, appointment cards, business cards, referrals, marketing folders, film bags, and signage, including a Focus Radiology logo sign above the entrance to the Engadine Premises and a Focus Radiology logo lightbox to be hung from the awning outside the Engadine Premises. Mr Chaudhry was copied in to most of this correspondence.

New Lease of Engadine Premises and Dr Kyatt's responses

1. On or about 7 July 2022, Engadine Medical Imaging entered into a lease for the Engadine Premises (New Lease). The circumstances in which that transaction occurred are not disclosed by the evidence. The New Lease itself is not in evidence.
2. On 12 July 2022 at 8:00pm, Mr Ibrahim sent a letter by email to Dr Kyatt and Mr Chaudhry. The letter was addressed to EMIS and stated the following (emphasis in original): I write to you in relation to Engadine Medical Imaging Services Pty Ltd's (herein referred to as Engadine Services) occupation at the premises of Suite 3, 24 Station Street, Engadine (the Premises). I advise as follows: 1. Engadine Medical Imaging Services Pty Ltd (Engadine Services) occupied the Premises pursuant to a Lease between Peter Anthony Thompson and Robyn Lesley Thompson and Pulse Medical Imaging Engadine Services Pty Ltd for a period of five (5) years commencing 1 February 2017 and expiring 31 January 2022 (as subsequently varied and transferred). 2. Engadine Services has occupied the Premises on a monthly overholding basis since the expiry of the Lease. 3. The managing agent, namely Paula Milsted of All Star Property Group, has written to each of you giving notice of the expiry of the Lease, seeking for you to exercise your option and renew the lease for an additional of five (5) year period. 4. You have failed, neglected and/or refused to renew the Lease and/or enter into negotiations in respect of the continued tenure at the Premises. 5. Engadine Medical Imaging Pty Ltd has been incorporated on 22 March 2022 to which I am sole Director and Secretary and has now entered into a Lease in respect of the Premises for a period of five (5) years, with further options. You are hereby on notice that Engadine Services is required to vacate the Premises, relocate its business and its business assets to alternate premises within thirty (30) days from the date of this letter, namely by not later than 5.00pm, Wednesday 10 August 2022. We require Engadine Services to take with it any of its plant and equipment, fixtures and fittings located within the Premises and leave the Premises in a clean and tidy condition. Any plant and equipment or property remaining at the Premises after the deadline specified above, will be considered abandoned and will be dealt with accordingly. The fit out at the Premises is the property of the Landlord and accordingly, is required to remain. No further payments of rent or outgoings are to be made and the Landlord has been directed to return any further payments purported to be made under the former monthly tenancy. As a further and separate point, your failure, neglect or refusal to enter into discussions with the agent in relation to the renewed or continued tenure at the Premises constitutes, without limitation, a fundamental breach of your obligations as director of Engadine Services, having failed to act in the best interest of shareholders.

Further developments in the Focus Radiology Group rebranding process

1. On 29 July 2022, Ms Coles sent an email to various Pulse Medical Imaging personnel, copied to Mr Chaudhry, stating that they would be rolling out new software for the practices which needed all contracts to be uploaded and asked that anyone with a contract email a copy to her. Taylah Bampton, an employee of EMIS, was among the recipients of this email.
2. On 9 August 2022, a meeting was held and attended by staff existing and prospective of the radiology practices forming part of the Focus Radiology Group (Focus staff). The minutes of that meeting, circulated by Ms Coles and copied to Mr Chaudhry, record the following agenda item: 10. Focus Radiology · Start using your focus email from the 15th of August. · Answer the phones as Focus Radiology. · Our app will stay the same. · [Ms Coles] will make an email sign off with the new logo. · Uniforms to be worn from the 15th of August. …
3. On 11 August 2022 at 11:04am, Ms Coles sent an email to Focus staff, copied to Mr Chaudhry, directing them to start sending out a template email notifying referrers that 'Focus Radiology (located at Dapto, Warrawong, Woonona, Warilla, Engadine) (formerly Pulse Medical Imaging and Southern Imaging Group)' had upgraded its imaging and reporting systems. Ms Coles said that the Focus URL had to start being used from that day.
4. On 11 August at 11:51am, an email was sent to Ms Coles by a Focus staff member, Eva Guyer, attaching screenshots of a fax and email in the form of a template advertisement intended for distribution to service providers, advising them as follows (emphasis in original): … [T]he following practices are merging to become Focus Radiology: - Warilla Medical Imaging - Woonona Medical Imaging - Engadine Medical Imaging - Southern Imaging Group Dapto - Southern Imaging Group Warrawong The new email for these sites are the site location name followed by @focusradiology.com.au…
5. On 14 August 2022, Ms Coles sent an email to Focus staff, copied to Mr Chaudhry, informing them that all email correspondence from Ms Coles going forward would be to their '@focusrad.com.au' emails only and suggesting that they turn on forwarding from their Pulse emails to their Focus emails.
6. On 15 August 2022, Ms Coles sent an email to Focus staff, copied to Mr Chaudhry, with the subject line 'Referrals / Film Bags / Appointment Cards', informing them that new referrals, film bags and appointment cards were going to be delivered to the clinics in the coming week. She also said (emphasis in original): Engadine - hold off for now using them - continue to use Engadine Medical Imaging stuff until further notice. All other sites - we can continue to use the appnt cards and referrals until they run out for referrers like Lakeside MP etc to get rid of stock. Please dispose of all film bags with Ali Kyatts name on them - do not use these. … Please note that now all the Referrals / Film Bags / Appointment Cards are no longer site specific. They can be used and ordered across all sites.

Mr Ibrahim's communications with All Star Property Group about the Lease

1. On 30 August 2022 at 1:42pm, Mr Ibrahim sent an email to Bradley Garland, the 'Licensee in Charge' of All Star Property Group, copied to Ms Milsted, with the subject line 'Urgent meeting request - Suite 3, 24 Station Street, ENGADINE NSW, 2233', asking if the two of them could meet to "discuss frankly what the landlord wants".
2. On 30 August 2022 at 1:47pm, Mr Garland replied by email to Mr Ibrahim, saying "the landlord has a lease, so they are satisfied with the situation" and indicating that Mr Ibrahim should be more specific about his reasons for wanting to meet.
3. On 30 August 2022 at 3:08pm, Mr Ibrahim sent an email to Mr Garland stating that he was happy that the lessors were satisfied, detailing his history of operating radiology practices out of the Engadine Premises over the past 16 years, and observing that Dr Kyatt had relocated to Jordan and seemed to have "lost interest in his Australian [business] commitments". Mr Ibrahim concluded by issuing Mr Garland with the following ultimatum: If you would like me to remain your tenant for decades to come, I need you to simplify everything and just issue the old tenant a 30-day vacate notice. This is the simplest and easiest way to prevent possible legal conflicts and waste everyone's time. To facilitate this, I am happy for you to invoice me any costs relating to issuing this notice or any expenses you have incurred to date (including yourself and your staff's valuable time). If you prefer [Dr Kyatt], I am happy to walk away with my team and start a new practice up the road.
4. On 30 August 2022 at 3:29pm, Mr Garland responded by email to Mr Ibrahim, stating that the lessors were not in any position of conflict and had a legally executed and enforceable lease, Mr Ibrahim's "internal matters in relation to directorship/shareholdings of companies and any fiduciary obligations past or present are a matter for you and your business associates", and that he (Mr Garland) was available to meet with Mr Ibrahim next week if he wished to discuss the matter further. Mr Garland concluded: But please keep in mind we will be enforcing the lease as executed.
5. On 31 August 2022 at 8:21am, Mr Ibrahim sent an email to Mr Garland in which he denied that the situation had anything to do with "alleged fiduciary obligations"; emphasised that his concern was Dr Kyatt's attempts to recover the Lease of the Engadine Premises (stating "[i]f I evict [Dr Kyatt], he will sue [the lessors] and myself for Relief against forfeiture and try to have the new lease transferred to him"); again urged Mr Garland to issue EMIS with a 30-day vacate notice and to officially terminate any prior month-to-month lease; and again stated that if Dr Kyatt was the preferred tenant, he was content to "walk away and start a new practice up the road with my team".

Dispute between Dr Kyatt and Mr Ibrahim regarding the New Lease

1. Following on from their correspondence in July 2022 (referred to above), throughout August and September 2022, New South Lawyers for Dr Kyatt and EMIS and Bridges Lawyers for Mr Ibrahim exchanged emails and letters about allegations concerning the New Lease, an alleged JVA and alleged fiduciary obligations said to be owed by Mr Ibrahim.
2. On 4 August 2022, New South Lawyers sent a letter by email to Bridges Lawyers referring to EMIS occupying the Engadine Premises pursuant to the Lease and the negotiation of the New Lease by Mr Ibrahim, which, they alleged, had been done without the consent or knowledge of EMIS. New South Lawyers stated: Our clients assert that Mr Ibrahim had, and continues to have, a fiduciary obligation to [EMIS] to act in the interests of joint venture partners in the business operating as [EMIS] (in which Mr Ibrahim has an interest), and any discussions Mr Ibrahim had with the landlord and/or their agent in respect of the Lease and the New Lease should have been as agent of [EMIS] to ensure the continued tenure of [EMIS] at the [Engadine] Premises, and not in his personal capacity as a director and shareholder of Engadine [Medical] Imaging, in which there is a clear conflict.
3. New South Lawyers concluded by inviting discussions to resolve the dispute, failing which they had instructions to apply to this court for urgent ex parte injunctive relief to prevent the eviction of EMIS from the Engadine Premises.
4. On 5 August 2022, Bridges Lawyers responded in a letter sent by email to New South Lawyers which relevantly stated (emphasis in original): 1. We are instructed there is no formal or informal joint venture between our clients and your clients, which relates to the business conducted at the [Engadine] Premises (the Business). In the event that your clients dispute this, please provide us with particulars that evidence your clients' position, including copies of any relevant documents. 2. Our clients' involvement in the Business is limited to that of a shareholder of [EMIS]… We are instructed that there is a shareholders agreement, but that the shareholders agreement does not give rise to any joint venture or other arrangements. 3. In relation to our clients' involvement in the Business, we are instructed that Mr Ibrahim is not and never has been a director of [EMIS]. Further, our clients have no control over the day to day conduct of the Business, and Mr Ibrahim has not attended the Business for a significant number of years for any reason. 4. Please articulate the basis on which you state at paragraph 6 of Your 4 August 2022 Letter that Mr Ibrahim owes a fiduciary obligation to [EMIS] in the circumstances.

Distribution of profits from Engadine Practice

1. On 5 September 2022, a distribution of profits from the Engadine Practice occurred. At 4:04pm that day, Mr Inayat sent an email to Mr Chaudhry with the subject line 'Engadine Distribute', noting that each of Dr Kyatt, Mr Chaudhry and Mr Ibrahim should receive $61,200, $25,080 and $39,600 respectively into their business accounts. At 7:15pm that day, Mr Chaudhry emailed Dr Kyatt and Mr Ibrahim to confirm that the distribution had been made and that Dr Kyatt's amount had been transferred to his UAE bank account.
2. This email indicated that Mr Inayat was acting as the accountant of the Engadine Practice, which is again contrary to what had been stated in Mr Ibrahim's email of 25 February 2022 to All Star Property Group (referred to above).

Lease of the Focus Engadine Premises

1. In late September and early October 2022, communications took place between Mr Ibrahim and Anthony Bouteris of Raine and Horne Commercial regarding the Focus Engadine Premises.
2. On 27 September 2022, Mr Ibrahim attended the Focus Engadine Premises and met with Mr Bouteris, who later sent an email to Mr Ibrahim with an attached brochure, survey and building plans of the entire site and building.
3. On 29 September 2022, Mr Ibrahim sent an email to Mr Bouteris stating proposed terms for a lease of the Focus Engadine Premises, asking Mr Bouteris to let him know urgently if the lessor would like to process it and noting that he had "approval at another location up the road that I can only delay for a day or two".
4. On 30 September 2022, Mr Bouteris sent an email to Mr Ibrahim saying that he had passed Mr Ibrahim's email on to the owner and was waiting for him to come back. Mr Bouteris said he would get back to Mr Ibrahim straight away.
5. On 5 October 2022, Mr Bouteris sent an email to Mr Ibrahim setting out the final agreed terms of a lease of the Focus Engadine Premises (Focus Engadine Lease), as previously discussed by the two of them over the phone. Those agreed terms included: 1. $86,000 per year + Outgoings + GST; (Copy of Outgoings to be provided shortly) 2. 5-year first term, with three 5-year options after that; 3. Four months rent-free; 4. 3% yearly increases; 5. Three months bond with a personal guarantee; 6. The landlord will ensure that there are at least 120 amps of power; …
6. On 7 October 2022 at 10:09am, Mr Ibrahim sent an email to Mr Bouteris indicating his readiness to enter into the Focus Engadine Lease, confirming that the lessee would be Engadine Medical Imaging, noting his own details for the purposes of the personal guarantee and stating that for the purposes of the transaction his solicitors would be Madison Marcus.
7. On 7 October 2022 at 10:15am, Mr Bouteris replied by email to Mr Ibrahim to say that he would do the memorandum of lease that day.
8. On 10 October 2022, Mr Ibrahim paid the deposit in respect of the Focus Engadine Lease. On 11 October 2022, Raine and Horne Commercial sent an email to Mr Ibrahim confirming receipt of his deposit in their trust account.
9. As stated below, the Focus Engadine Lease was executed on 22 November 2022.

Continuation of Focus Radiology rebranding process

1. On 13 September 2022, an employee of EMIS, Ms Bampton, sent an email to a specialist medical practice in Miranda, Sports Medicine Institute, using a Focus Radiology email address and a sign off of (emphasis in original): Kind Regards, Taylah Bampton Focus Radiology/ Engadine Medical Imaging
2. Also on 13 September 2022, Focus Radiology's Marketing Liaison Officer, Erin Furlong, sent an email to various medical practices, which relevantly stated: This is a follow up email to request a meeting with the Doctors and staff at your Clinic. To introduce Focus Radiology (previously Southern Imaging Group and Pulse Medical Imaging), we would like to provide lunch to your doctors introduce a new Clinical lead and Radiologist Dr Naushad Ahamed (Nash) who has joined us full time, in our practices located in Engadine, Dapto, Warilla, Warrawong and Woonona.
3. On 30 September 2022, an email exchange took place between Focus staff members (Ms Furlong and Ms Coles) concerning a proposed email communication to local medical practices with a brochure advertising the availability of PRP injection procedures at Focus Radiology's Dapto and Woonona clinics. The brochure is not in evidence. Ms Coles was asked by Ms Furlong whether the email when sent to medical practices in the Engadine area should be identified as Focus Radiology, and Ms Coles replied: Hey hun, thats fine Maybe do Engadine area down to the Woonona area (helensburgh etc) Theres nothing about Engadine on there so essentially they wont know lol
4. I was invited by the plaintiffs to find that this was an effort made to conceal the Focus Radiology rebranding from EMIS. I do not make that finding. The brochure is not in evidence and the email only refers to a service being offered at the Dapto and Woonona clinics. It is therefore an advertisement of the Focus Radiology business at those clinics.
5. On 26 October 2022, Focus Radiology made a Facebook post with graphics introducing Focus Radiology in Engadine, Woonona, Dapto, Warrawong and Warilla, stating: Hello all, we'd like to introduce ourselves as Focus Radiology, previously Southern Imaging Group and Pulse Medical Imaging. Our sites are located at Engadine, Woonona, Dapto, Warrawong and Warilla. For more information check out our website www.focusrad.com.au

Negotiations regarding the New Lease and Deed of Settlement and Release

1. On 3 November 2022, Bridges Lawyers sent a letter to New South Lawyers marked "Without Prejudice Save as to Costs", advancing a settlement offer including the following proposed terms: 1. Engadine Medical Imaging would consent to the assignment of the New Lease to Dr Kyatt or his nominee, subject to a return of the bond and all rent paid by Engadine Medical Imaging to date and there being no further liability of Engadine Medical Imaging in relation to the Engadine Premises; 2. EMIS would pay $700,000 (plus GST) to MI No. 2 as consideration for MI No. 2's 30 units in the Engadine Imaging Trust and the assignment of the New Lease; 3. EMIS and Dr Kyatt would release and discharge Engadine Medical Imaging and Mr Ibrahim from any claims and/or loss which EMIS or Dr Kyatt had, have had or in the future may have, arising from or in any way in connection with the New Lease; 4. the settlement offer was made on the basis that the value of the business and equipment of EMIS was substantial; and 5. there was no binding and enforceable agreement entered between the parties until the exchange of agreed documents.
2. In cross-examination (T71-72), Dr Kyatt said that he read this letter carefully upon receiving it and that he had the benefit of legal advice about the interpretation of it from his lawyer, Dragan Gasic of New South Lawyers. Dr Kyatt said that the legal advice was provided in communications he had with New South Lawyers, including by telephone. Dr Kyatt said that from November 2022 to July 2023 in general he followed and agreed with the advice provided by Mr Gasic (T72-73).
3. Dr Kyatt also said in cross-examination that in late 2022 and early 2023 he also took and followed advice from Toufic Bazouni of New South Lawyers (T80).
4. In further cross-examination, Dr Kyatt initially denied that at the time the offer in the 3 November 2022 letter was made, he understood that the $700,000 figure represented consideration for both the transfer or redemption of Mr Ibrahim's units in the Engadine Imaging Trust and the assignment of the New Lease (T71 and T73), but maintained that he had read the letter containing the offer carefully (T72 and T73-74). When Dr Kyatt was later questioned about his understanding of this offer in the context of a counter offer made by Dr Kyatt through a letter of 21 November 2022 from New South Lawyers to Bridges Lawyers (dealt with in more detail below), Dr Kyatt conceded that Mr Ibrahim was offering the two components in the offer of 3 November 2022 (T82-83).

2022 financial position of EMIS

1. The profit and loss statement for EMIS for the year ending 31 December 2022 shows that the total income was $1,876,014.72 and total expenses were $1,766,170.54 (including a consulting fee of $188,487.27), making the net profit of $114,588.23.
2. There is no balance sheet for EMIS for the year ending 31 December 2022 so the equity position is unknown.

Dr Kyatt's unsatisfactory evidence about the financial position of EMIS

1. Another aspect of Dr Kyatt's evidence which I reject is his attempt in cross-examination to suggest that he did not understand the financial statements of EMIS that were prepared each year and which he agreed he saw (T85). His evidence on this topic is not credible.
2. The evidence Dr Kyatt gave in cross-examination about this subject was as follows (T86-91): Q. In November 2022 can his Honour take it then that the last financial statement you had seen, at least in draft form, is that which begins at 560 through to 569? A. Yes. Q. Again, I wish to be clear about it, because I may not have been entirely clear. I'm directing your attention to November 2022, and you agree, do you not, that the last financial statement you recall seeing is that which is in front of us at page 560 and onwards. Correct? A. Yes. Q. You would have picked up, had you known that, that the company, and the trust, I should say, had made only a very small profit of $32,000 odd, 563. A. Yes, that's what he presented to me. Q. You would have picked up, if you look at 565 that the total equity was negative $50,000. Correct? A. Now I'm looking at it, yes. Q. Can I suggest to you that in November 2022 you must have had these figures in the back of your mind. A. Not really, no. Q. You certainly had no other financial statements other than this one. Correct? A. I have the bank account to rely on. Q. Can I suggest to you that if you have regard to these figures from 560 to 569, you must have understood in November 2022 that the Engadine Trust was worth nowhere in the order of the figure that you or Mr Ibrahim were talking about in that year. A. I don't understand these figures presented by the accountant. Q. Are you seriously suggesting to his Honour that you have some problem in understanding the profit and loss on the balance sheet found between 560 and 565? Are you seriously suggesting that? A. Yes. Q. Of course, by this stage you had invested in a number of practices. Correct? A. Correct. Q. You had, as we've seen before morning tea, considered investing in a number of businesses unrelated to medicine. For example, childcare facilities? A. Yes. Q. And property investment. Correct? A. Yes. Yes. Q. And investment in some businesses. Correct? A. Correct. Q. You must had in the course of your work, or investments or potential investments, occasion to read balance sheets and financial statements of the kind we have in front of us. A. I don't have that time. Q. You don't have? A. Time to - to read all of these papers presented to me. I rely on people to help me do these investments. Q. Can I suggest to you by 2022 you knew how to read what appears in the balance sheet and the profit and loss we have in front of us, for example? A. Not really. Q. What's so hard about it? A. Because I rely on other people to help me. Q. My question is what's so hard about it? A. I haven't tried to read them before. Q. Let me understand that answer. HIS HONOUR Q. I just need to clarify. A. Yes, your Honour. Q. You said you hadn't tried to understand it before. Are you saying before now? Is this the first time you've looked at a set of accounts, is it? A. Your Honour, I look at them. He send it to me to get my approval on them, but I don't go through them. I don't go through them. CONDON Q. You were, on the evidence you have put before his Honour, the person who was in charge of the Engadine practice until October 2019. Correct? A. Engadine? February 18. Q. Can I suggest to you that as a person interested financially in the Engadine practice, you certainly wanted to read the documents of the kind we have in front of us at 560 to 569 in the 2021 year and the earlier years, didn't you? A. Can you repeat the question again, sorry. Q. I'll ask a different question. Can I suggest to you that at the end of each financial year you received a financial statement of the kind we have in front of us. A. Correct. Q. You read it, didn't you? A. No. Q. Can I suggest to you, you read it because you wanted to understand how the company or the trust was performing. A. No, that - that's not my way to understand how the business is going. I have different way to - sorry to interrupt you. Q. I want to suggest to you that the best way, you knew at least a way to understand how the business was performing, that is, the Engadine practice, was to read the documents in front of you. A. No. Q. I want to suggest to you that when you did read it you were able to understand how much income and how much the expenses were in a particular financial year. You were able to understand that, weren't you? A. Can you repeat the question again? Q. You were about to understand, can I suggest to you, reading these documents - A. Yes. Q. - how much the income was and how much the expenses were? A. I was not interested in that, so I didn't read them. Q. If you weren't interested in this material, what material did you look at? A. I was - I was on the ground. I'm a professional. I have a lot of things more important than this at completely different numbers. I'm looking - I'm looking at - I'm looking at patients' wellbeing, life, bleeding. Patients are going to die. Patients need to go to emergency straightaway, so I - I did a business when I rely on other people to help me with. If I don't have people I rely on them, I don't go into business. Q. Even if you relied upon other people such as the accountant, do you not know at the end of 30 June 2021 that the Engadine practice had made only a small profit of $30,000? A. (No verbal reply) Q. Of approximately $30,000? A. (No verbal reply) Q. Did you not know that? A. I could see it at that time in good health - in good shape. Q. Did you not know some time after the end of the 2021 financial year that the Engadine practice had made but a small profit of about $32,000; did you not know that? A. I didn't know that. Q. And did you not know, according to the balance sheet, the liabilities exceeded the assets? A. I didn't know that. Q. And do you say that on your oath to his Honour for each of the financial years in 30 June 2018 through to 30 June 2021, which are the years covered by these financial statements? A. Can you repeat that question again, sorry? Q. Are you saying you didn't know at any time between financial year 2018 and financial year 2021, which are the years covered by these financial statements, you didn't know whether the practice, the Engadine practice, had made a profit or a loss? A. No, I know it was good business. Q. Did you know that it had been trading did you know at any time that according to these sorts of documents, it had been trading at a loss? A. No. Q. And did you know at any time that the liabilities of the trust exceeded its assets? A. No. Q. And are you saying to his Honour that not once did you cast your eyes over these documents which exist from 534 to 569, not once did you look at these documents? A. I don't know which one I start with. I do not want pretend I understand them. Q. Don't pretend to understand, I'm asking you, you're saying to his Honour, not once between FY 2018 and FY 21 did you ever cast your eyes over the documents that appear from pages 534 through to 569? A. No. Q. You're agreeing with me? A. I didn't look at them, if I understand your question. Q. And you say to his Honour you never looked at them even though you agree that your accountant either had them or gave them to you; is that right? A. Yes. Q. I want to suggest to you, you're simply making up this evidence? A. Again, your question? Q. I want to suggest to you that you're simply making up this evidence about not looking at the financial figures? A. I'm not sure if I understand your question. Q. I'll be plainer. You know that you are deliberately giving false evidence to his Honour about your lack of knowledge about these financial statements? A. No, you are wrong. Q. Did you have these in your possession, by the way? These financial statements? A. I don't save them. I receive them on the email, I don't save them. Q. So your evidence is you get rid of them after you receive them; is that right? A. I don't get rid of them - Q. Right - A. - he send me to get my signature on them, and I send them back to him. Q. But you certainly know when you came to swear your affidavit in April 2023, you certainly knew of their existence because you annexed them to that affidavit, don't you? A. Yes, certainly, yes.

Establishment of Focus Radiology Engadine

1. In tandem with the events concerning the draft Deed, the business of Focus Radiology Engadine was being established at the Focus Engadine Premises.
2. On 22 November 2022, the Focus Engadine Lease was executed.
3. On 22 November 2022 at 3:55pm, Ms Coles sent an email to Ms Bampton (an employee of EMIS) attaching a written formal warning letter - significantly, on Focus Radiology letterhead - regarding her conduct in the workplace, citing instances of Ms Bampton arriving late, going home early and not checking referrals.
4. Also on 22 November 2022, Chris Germon of Crowd IT and Mr Ibrahim corresponded via email about a quote that had been provided by telecommunications company TPG Telecom for the price of installing internet at the Focus Engadine Premises.
5. From late November 2022 through to late February 2023, various steps were taken to get the radiology business of Focus Radiology Engadine up and running, many of them involving Ms Coles. Over this period, the following took place: 1. At the request of Ms Coles by email on 28 November 2022, Mr Ibrahim provided Ms Coles with the following details for the new practice via email on 6 December 2022: 1. Entity name: Engadine Medical Imaging Pty Ltd, trading as Focus Radiology Engadine; 2. ABN, ACN, BSB and bank account number; and 3. Address of the Engadine site, being the Focus Engadine Premises. 1. On 6 December 2022, Ms Coles liaised by email with Mr Germon of Crowd IT, who arranged for the allocation of a phone number and a fax number to Focus Radiology Engadine. 2. On 14 December 2022, Ms Coles contacted professional printers by email to request mock-ups of Focus Radiology-branded referral forms, appointment cards and letterheads for Focus Radiology Engadine only (removing all references to other sites), which were created and sent to her for proofing by emails on 21 December 2022 and 2 and 8 February 2023. In her email of 14 December 2022, Ms Coles instructed the professional printers as follows: Can you please make sure that no drafts, emails or invoices are sent to [Mr Chaudhry] or the [Engadine Practice]. To liaise with me directly through this email [dcolesengadine@gmail.com] or via phone ... The plaintiffs invited me to infer that the purpose of requesting that nothing be sent to Mr Chaudhry or the Engadine Premises was to ensure that there was no paper trail revealing any involvement of Mr Chaudhry in these activities. In the absence of evidence from Ms Coles, I draw that inference. 1. On 19 December 2022, a request on Focus Radiology letterhead was sent to Wollongong Hospital by Focus Radiology Warrawong (albeit signed, "Kind Regards, Focus Radiology Warilla") asking for any medical reports for a patient. At the bottom of the form the locations of the Focus Radiology practices were listed as Dapto, Engadine, Warilla, Warrawong and Woonona. 2. On 31 January 2023, Mr Ibrahim ceased to be the administrator of the EMIS account with Officeworks and it was changed to Lindley Gomez with the email address "". 3. On 13 February 2023, Ms Coles registered Focus Radiology Engadine for diagnostic imaging accreditation. 4. On 14 and 23 February 2023, Ms Coles sent emails in which she instructed the professional printers to deliver the promotional material that had been ordered to her in Dapto. The plaintiffs said that I should find that this arrangement was made to conceal the efforts made to establish the competing business from EMIS. In the absence of evidence from Ms Coles, I make that inference. 5. On 18 February 2023, Crowd IT issued a Partnership Proposal to Mr Chaudhry, which outlined the terms in accordance with which Crowd IT would provide IT equipment, software and support services to Focus Radiology at each of its Engadine (for which the listed address was the Focus Engadine Premises), Woonona, Dapto and Warilla locations. 6. On 22 February 2023, Ms Furlong sent an email to Ms Coles attaching draft referral and imaging request forms for Focus Radiology Engadine which identified the Focus Engadine Premises as the practice location. 7. On 26 February 2023, Mr Chaudhry signed the Partnership Proposal with Crowd IT on behalf of Focus Radiology as the customer.

Inferences about Focus Radiology rebranding and knowledge of Dr Kyatt

1. The plaintiffs submit that I should find that the rebranding of the various practices to Focus Radiology was discussed and agreed by Mr Ibrahim and Mr Chaudhry prior to 11 August 2022 and that Mr Ibrahim took active steps to take the business of EMIS and to set up the competing business on and from July 2022 to the knowledge of Mr Chaudhry. For the reasons set out below, I am prepared to draw those inferences.
2. Mr Ibrahim was in control of Engadine Medical Imaging setting up the Focus Radiology practice at the Focus Engadine Premises. Mr Chaudhry was in control of least Focus Radiology Dapto and Focus Radiology Warrawong. Ms Coles was employed by one of the Focus Radiology businesses, although it is not clear exactly which one. The rebranding was a fundamental matter to each of those businesses. The rebranding was a lengthy and coordinated exercise, spanning many months. There is evidence of the personal involvement of Mr Ibrahim and Mr Chaudhry in the rebranding at different times. Neither of them has given any evidence.
3. Ms Coles, who was clearly instrumental to the overall rebranding project, must have been working at the direction of Mr Ibrahim in relation to the Focus Radiology Engadine rebranding and at the direction of Mr Chaudhry in relation to the Focus Radiology Dapto and Warrawong rebranding. Ms Coles has not given evidence.
4. In light of the fact that Ms Coles was working at the direction of Mr Ibrahim and Mr Chaudhry at various times and employed by one or more of the entities that became part of the Focus Radiology Group, I consider that either of Mr Ibrahim or Mr Chaudhry would be expected to call Ms Coles as a witness to give evidence in their respective cases and that their failure to do so is unexplained.
5. The combination of all of these matters makes available an inference that the uncalled evidence of each of Mr Ibrahim, Mr Chaudhry and Ms Coles would not have assisted the respective cases of Mr Ibrahim and Mr Chaudhry. The unexplained failure to call evidence from each of Mr Ibrahim, Mr Chaudhry and Ms Coles also enables me to draw, with greater confidence, an inference unfavourable to each of Mr Ibrahim and Mr Chaudhry, since those witnesses, had they been called, clearly would have been in a position to cast light on whether that (unfavourable) inference should be drawn.

Finalising the Deed of Settlement and Release and Deed of Assignment

1. On 15 February 2023, Bridges Lawyers emailed New South Lawyers, copying in GA Lawyers, with a further (third) version of the draft Deed which reinstated the previous form of the clauses that had been amended by New South Lawyers on the last occasion, stating: While the recitals in the deed of settlement and release outline the allegations made by [Dr Kyatt], [Mr Ibrahim] requires that a clear release in respect of the lease and these allegations be acknowledged in the deed. We note that there is no loss to [Dr Kyatt] to include this release.
2. The email also attached comments on a draft of the Deed of Assignment (draft Assignment Deed) to assign the New Lease to EMIS.
3. On 16 February 2023 at 7:05am, Mr Gasic forwarded to Dr Kyatt the Bridges Lawyers' email of 15 February 2023 and its attachments, saying that he would review the documents and make a recommendation during the course of that day.
4. On 16 February 2023 at 9:37am, New South Lawyers sent a reply email to Bridges Lawyers, copied to GA Lawyers, stating that they were obtaining instructions.
5. On 16 February 2023 at 10:44am, Bridges Lawyers replied by email to New South Lawyers, copied to GA Lawyers, saying: Could all parties please take note that our client has instructed us that he requires settlement by Thursday next week. This is due to a number of urgent commercial matters including that our client is being pressured by the managing agent of the property in relation to payment of rent for the premises.
6. On 16 February 2023 at 4:28pm, Mr Gasic sent an email to Dr Kyatt forwarding him the email of 15 February 2023 from Bridges Lawyers which attached the amended draft Deed and the draft Assignment Deed. Mr Gasic noted as follows: We will be required to provide you with advice on the effects of the changes on any future claim you may have against Mena arising out of the allegations by [EMIS] that Mr Ibrahim: (a) is a director or officer of [EMIS]; (b) is a party to a partnership and/or joint venture agreement involving [EMIS] and Dr Kyatt; and (c) procured the Lease, inter alia, in breach of his duties owed to [EMIS].
7. In the email, Mr Gasic also outlined the estimated costs for performing further work on the matter for Dr Kyatt.
8. In cross-examination (T115), Dr Kyatt agreed that when he read this email and the email of 15 February 2023 from Bridges Lawyers with the attachments he understood that Mr Ibrahim was suggesting that the releases be substantially widened in his favour, Mr Ibrahim wanted to change the proposed deed in a way that favoured him and Dr Kyatt saw that Mr Ibrahim was doing this to benefit himself. Dr Kyatt denied that he thought Mr Ibrahim was doing this in order to assist himself in running a competing business through Engadine Medical Imaging. I do not accept this evidence in light of the finding that I have made that from July 2022 Dr Kyatt was aware that Mr Ibrahim wanted to take the business of the Engadine Practice and install a business in place of it.

Removal of Mr Chaudhry as a director of EMIS

1. On 22 February 2023 at 3:00pm, Dr Kyatt called a meeting of the shareholders of Advanced Imaging, the sole shareholder of EMIS, and passed a resolution removing Mr Chaudhry as a director and secretary of EMIS. This left Dr Kyatt as the only director of EMIS. In cross-examination (T127-128), Dr Kyatt agreed that this was done without Mr Chaudhry's knowledge or awareness as Dr Kyatt was in Jordan at that time and did not telephone Mr Chaudhry to give him notice of his proposed removal.
2. In cross-examination (T72-73), Dr Kyatt conceded that he neglected to send Mr Chaudhry an email notifying him of his removal as a director of EMIS, which he identified as the only occasion between November 2022 and about July 2023 on which he failed to act on the advice he received from New South Lawyers.
3. Dr Kyatt had received an email on 24 February 2023 from Mr Gasic with the draft form of an email to send to Mr Chaudhry informing him of his removal, which he did not send (T126-127).
4. There is no evidence that before the Deed of Settlement and Deed of Assignment (referred to below) were executed Mr Chaudhry was asked to sign them on behalf of EMIS. Dr Kyatt admits that he did not ask Mr Chaudhry to do so and Mr Inayat was not called as a witness to say that he had done so (T128).
5. In cross-examination (T129-130), Dr Kyatt was challenged about his failure to tell Mr Chaudhry that he was removing him as a director of EMIS even though it was a simple matter for Dr Kyatt to telephone or email Mr Chaudhry to inform him. In my assessment and having regard to Dr Kyatt's credibility, Dr Kyatt deliberately did not tell Mr Chaudhry that he was removing him as a director of EMIS, despite his denial and his evidence that he simply forgot to do so. To my mind, it was too significant a matter to have simply been forgotten.

Deed of Settlement and Deed of Assignment executed

1. On 22 February 2023 at 3:00pm, Dr Kyatt also passed a resolution as the sole director of EMIS to approve the terms of the Deed of Settlement and Release and the Deed of Assignment of the New Lease and authorise Dr Kyatt to sign each of them on behalf of EMIS.
2. On 23 February 2023, the Deed of Settlement was executed between Engadine Medical Imaging, Mr Ibrahim, EMIS and Dr Kyatt, in a form that included the release in cl 5.2 that Bridges Lawyers had sought to retain. Relevant terms of the Deed of Settlement as executed are as follows: Recitals … G. [EMIS] has made the Allegations. Mr Ibrahim denies the Allegations. H. Mr Ibrahim is a director of Ml No.2. Mr Ibrahim's interest in [EMIS] is limited to his interest in the unit holdings of Ml No.2 in Engadine Imaging Trust of which [EMIS] is the trustee. … 1.1 Definitions In this Deed the following defined terms shall have the following meaning: Allegations means the allegations by [EMIS] that Mr Ibrahim: (a) is a director or officer of [EMIS]; (b) is a party to partnership and/or joint venture agreement involving [EMIS] and Dr Kyatt; and (c) procured the Lease, inter alia, in breach of his duties owed to [EMIS]. … Claims includes all actions, suits, causes of action, arbitrations, debts, liabilities, dues, costs, claims, Loss, demands, directions, orders, verdicts and judgments arising from or in connection with the Lease and the Allegations whether it is past, present or future. … Dispute means the disagreement between the Parties in relation to or in connection with the Lease and occupation of the Premises, and the Allegations. … Lessee means Engadine Medical Imaging Pty Ltd… … Loss means any damage, loss, cost, liability or expenses of any kind and however arising (including as a result of any Claim arising from or in connection with the Lease and the Allegations. … Parties means the Lessee, Mr Ibrahim, [EMIS] and Dr Kyatt. … 5. Release 5.1 The Lessee and Mr Ibrahim Release of [EMIS] and Dr Kyatt Upon receipt of the Reimbursement and Settlement Sum in accordance with this Deed the Lessee and Mr Ibrahim releases and discharges [EMIS] and Dr Kyatt, [EMIS'] directors, servants and agents from any Claims and/or Loss which the Lessee has, has had, or in the future may have, arising from or in any way in connection with the Dispute. 5.2 [EMIS'] and Dr Kyatt's Release of the Lessee and Mr Ibrahim Upon entry into this Deed, [EMIS] and Dr Kyatt hereby release and discharge the Lessee and Mr Ibrahim, the Lessee's directors, servants and agents from any Claims and/or Loss which [EMIS] and Dr Kyatt have, have had, or in the future may have, arising from or in any way in connection with the Dispute and the Allegations. 5.3 Bar to further claims by the Parties The releases in this clause may be pleaded by a Party who has the benefit of the release as a complete bar to any further action, proceedings and/or Claims. 5.4 Continuation of Parties' Relationship (a) The Parties acknowledge and agree that the releases in clause 5 of this Deed are only with respect to the Dispute and do not prejudice the Parties' rights with respect to any and all other obligations, dealings or agreements between them. (b) For the avoidance of any doubt, the Parties acknowledge and agree that: (i) Mr Ibrahim's involvement with [EMIS] is limited to his interest in MI No. 2's unit holdings in Engadine Imaging Trust; and (ii) Mr Ibrahim is not a party to any partnership and/or joint venture agreement involving [EMIS] and Dr Kyatt. … 9. Warranties and representations The Parties warrant and represent that: (a) they understand the legal significance and effect of signing this Deed and have had the opportunity to obtain independent legal advice in respect of this Deed; (b) they enter into this Deed voluntarily and they not been induced to execute this Deed by any improper pressure, coercion, duress or undue influence; (c) they have had adequate opportunity to negotiate the terms of this Deed and to obtain competent legal and other professional advice concerning the matters raised in this Deed and the terms and effect of this Deed; and (d) the terms of this Deed are binding upon them according to its terms. … 13. Entire understanding 13.1 Entire agreement This Deed: (a) is the entire agreement and understanding between the Parties on everything connected with the subject matter of this Deed; and (b) supersedes any prior agreement or understanding on anything connected with that subject matter. 13.2 No reliance The Parties acknowledge that no reliance has been placed on any prior agreement, understanding or representation.

Mr Chaudhry resigns from EMIS

1. On 17 March 2023, Mr Chaudhry formally signed his written resignation as a director, manager and sonographer of EMIS with effect that day.
2. On 17 March 2023, Madison Marcus (the solicitors for Mr Chaudhry) wrote to Dr Kyatt adverting to the measures taken by Dr Kyatt to remove Mr Chaudhry as a director of EMIS on 23 February 2023, and stating that: … 10. We note that a person can only be removed as a director by resignation or by a resolution being passed for that person to be removed as a director. 11. We further note that: (a) Mr Chaudhry was not made aware of and did not consent to [these measures], nor did he execute any documentation with respect to his removal as director or secretary of EMIS; (b) Mr Chaudhry did not consent to his removal as a director and secretary; (c) No resolution was passed pursuant to the Corporations Act 2001 (Cth) to remove Mr Chaudhry as a director. 12. As such, the purported removal of Mr Chaudhry as director and secretary of EMIS was unlawful and fraudulent. Services to [EMIS] 13. From approximately his appointment as director of EMIS on 26 September 2019 to present, Mr Chaudhry acted as Manager of [EMIS] and was responsible for managing the day-to-day operations of [EMIS].
3. The letter attached the formal signed written notice of Mr Chaudhry's resignation as a director, manager and sonographer of EMIS.
4. On 18 March 2023, the letter of 17 March 2023 from Madison Marcus to Dr Kyatt was emailed to him.

Continuous operations of EMIS to March 2023

1. In cross-examination (T125), Dr Kyatt agreed that from the time that the New Lease was entered into by an interest concerned with Mr Ibrahim in July 2022 and throughout all of the negotiations in the background that led to the execution of the Deed of Settlement, EMIS continued to occupy the Engadine Premises, conduct the Engadine Practice in the same way and pay rent month-to-month, such that it was "business as usual" in the Engadine Practice. Dr Kyatt also agreed that in March 2023, about a month after Dr Kyatt took steps to remove Mr Chaudhry as a director, things came to a standstill at the Engadine Practice when employees left and the Engadine Practice stopped functioning (T125-126).

Focus Radiology Engadine practice commences

1. On 23 March 2023 at 4:13am, Mark McCudden, the Group Financial Controller of Vision Radiology, sent an email to Mr Ibrahim and Mr Chaudhry (amongst others) seeking their advice on the transfer of employees from the Engadine Practice to the Focus Engadine Practice.
2. On 23 March 2023 at 7:38am, Mr Ibrahim replied to Mr McCudden, copying in Ms Coles and Mr Chaudhry, saying: All the employees have applied for new positions on Seek. If we choose to hire them at the new practice, they must resign from existing company and they will then be completely paid out. The new practice is a new, unconnected entity. Old entitlements cannot be rolled over to the new company, but as with any employer, I will have the discretion to add bonus sick days later on.
3. On 23 March 2023, Mr Ibrahim wrote to Ms Bampton, a receptionist at the Engadine Practice, to offer her employment as a receptionist at Focus Radiology Engadine.
4. On 26 March 2023, five employees of EMIS at the Engadine Practice (Karen Davison, Jiawei Mei, Matthew Dyball, Taylah Bampton and Amy Marzol) each tendered their resignation via email to Mr Inayat.
5. On 26 March 2023, another employee of EMIS, Lindley Gomez, tendered her written resignation to Dr Kyatt.
6. Around this same time, EMIS employees (Karen Davison, Taylah Bampton, Matthew Dyball and Amy Marzol) accepted positions working for Focus Radiology Engadine.
7. On 27 March 2023, Ms Coles sent an email to Mr Chaudhry containing an announcement to doctors, practice managers and administration teams, introducing Focus Radiology Engadine as a new radiology clinic open in Engadine (at the Focus Engadine Premises) and attaching a list of services offered by the practice.
8. On or around 27 March 2023, after conducting some online searches, Dr Kyatt became aware that Mr Ibrahim was operating a new radiology practice (Focus Radiology Engadine) out of the Focus Engadine Premises (less than 100 metres from the Engadine Premises).
9. On 26 March 2023, Dr Kyatt telephoned an associate of his, Ameer Al-Khigani, from Jordan and offered to employ him as managing director of EMIS. Mr Al-Khigani accepted that offer and it was agreed that he would commence in the role on 28 March 2023. At this time, Dr Kyatt told Mr Al-Khigani that the Engadine Practice staff appeared to be working for a competing radiology practice in Engadine and instructed Mr Al-Khigani to attend the Engadine Premises and investigate.

ISSUE 1: THE CLAIMS AGAINST MR IBRAHIM

1. There are three claims against Mr Ibrahim: 1. Mr Ibrahim breached duties owed by him to EMIS under the Corporations Act as an officer of EMIS. 2. Mr Ibrahim breached duties owed to EMIS in relation to its confidential information. 3. Mr Ibrahim breached the ACL by his misleading or deceptive conduct in making representations (including by silence) during the negotiations of the Deed of Settlement in relation to the Engadine Practice and the establishment of the Focus Radiology Engadine practice.
2. I will deal with each in turn.

Was Mr Ibrahim an officer of EMIS?

1. Mr Ibrahim was never a director of EMIS. His interest in EMIS was as a director of MI No. 2, which held 30 units in the Engadine Imaging Trust as trustee for the MI No. 2 Family Trust.
2. The plaintiffs claim that Mr Ibrahim was an officer of EMIS for the purposes of s 9AD(1)(b)(i), (ii) and (iii) of the Corporations Act which relevantly provide: 9AD Meaning of officer (1) An officer of a corporation … is: (a) … (b) a person: (i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (ii) who has the capacity to affect significantly the corporation's financial standing; or (iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or …
3. The relevant authorities on the application of these provisions of s 9AD were conveniently collected in Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79 by Nixon J who said at [495]-[500]: [495] In Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 at [23]-[27], French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ made a number of observations regarding the definition of "officer" in s 9, and in particular, subparagraph (b)(i) of that definition, including that: (1) each of the three classes of persons described in paragraph (b) of the definition of "officer" is evidently different from (and a wider class than) the persons identified in the other paragraphs of the definition. Persons identified in the other paragraphs all hold a named office in or in relation to the company, whereas those identified in paragraph (b) do not. Those identified in paragraph (b) are identified by what they do (subparagraph (i)), what capacity they have (subparagraph (ii)) or what influence on the directors they have had and continue to have (subparagraph (iii)) (at [25]); (2) there being these differences between paragraph (b) of the definition and the other paragraphs (especially paragraph (a)), it is not to be supposed that persons falling within subparagraph (b)(i) must be in substantially the same position as directors (at [25]); (3) the inquiry required by subparagraph (b)(i) of the definition must be directed to what role the person in question plays in the corporation. It is not an inquiry that is confined to the role that the person played in relation to the particular issue in respect of which it is alleged that there was a breach of duty (at [23]); (4) subparagraph (b)(i) distinguishes between making decisions of a particular character and participating in making those decisions. The notion of "participation" directs attention to the role that a person has in the ultimate act of making a decision, even if that final act is undertaken by some other person or persons. The notion of participation in making decisions presents a question of fact and degree in which the significance to be given to the role played by the person in question must be assessed (at [26]); and (5) participation in any decision of a corporation does not make a person an "officer". Rather, the decisions in which the person participates must have the significance for the business of the corporation that the statute prescribes (that is, "decisions that affect the whole, or a substantial part, of the business of the corporation"). Whether a person participates in making decisions of a particular character requires examination of what contribution that person makes to the making of a decision (at [27]). So, on the facts of Shafron, a senior executive who shaped and developed a proposal through its successive variants for the directors, presented successive proposals to them, and promoted their adoption, was held (at [31]) to have "participated" in the decision to accept that proposal. [496] As for subparagraph (b)(ii) of the definition of "officer", the Full Court in Grimaldi v Chameleon Mining (No 2) at [73] observed that: the subpara (b)(ii) requirement that a person has the capacity to affect significantly the corporation's financial standing refers to the character properly to be attributed to that person's capacity in the circumstances. It may arise from the extent of that person's participation in investment decisions or financial commitments made, from the dimensions of a decision or decisions, from the nature of that person's participation in the control and direction of the affairs of the corporation, etc: cf Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253 at [74] (ASIC v Adler). The question again is one of fact. [497] In the passage of Australian Securities and Investments Commission v Adler and Ors (2002) 168 FLR 253; [2002] NSWSC 171 which was cited by the Full Court in Grimaldi, Santow J held (at [74]) that Mr Adler was an officer of HIHC within subparagraph (b)(ii) of the definition because "his involvement in matters pertaining to investment [of the corporation's funds] … gave that capacity" to affect significantly the corporation's financial standing, and "more broadly because of his participation in the control and direction of the affairs of the Group". In Australian Securities and Investments Commission v King (2020) 270 CLR 1; [2020] HCA 4 at [53]-[59], Kiefel CJ, Gageler and Keane JJ referred with evident approval to these paragraphs of Grimaldi v Chameleon Mining and ASIC v Adler. Their Honours concluded at [58] that: The reasons in Grimaldi, when read as a whole, recognise that para (b) of the definition of 'officer' expands the coverage of the duties of officers of a corporation to include individuals who would not be officers of a corporation within the ordinary meaning of the term. Grimaldi is distinctly not supportive of the view that, as a matter of law, a person who satisfies either of the requirements of para (b)(i) or para (b)(ii) of the definition does so only if that person is acting in a recognised office within the corporation. [498] Having regard to the language of the definition of "officer", their Honours held (at [24]) that: While para (a) of the definition captures individuals who hold a named office in a corporation for which the Act prescribes certain duties and functions, para (b) captures those who do not hold such an office. Paragraph (b) defines 'officer' by reference to the facts of the relationship between an individual and a corporation in relation to the affairs of the corporation. The contrasting language is a powerful textual indication that Parliament did not intend to confine the class of persons described in para (b), including sub-para (ii), by an unexpressed requirement that the relationship between an individual and a corporation be identified by reference to a recognised position with rights and duties attaching to it. [499] In ASIC v King at [88], Nettle and Gordon JJ commented that: Paragraph (b) is thus 'essentially functional in character, its concern being with the stipulated quality of a person's actions or capacity and their effects'. Sub-paragraphs (i) and (ii) are 'concerned with identifying persons who are involved in management of the corporation' - that is, people 'involved in policy making and decisions that affect the whole or a substantial part of the business of the corporation'. And, of course, a person may, by their conduct, satisfy more than one of the categories of officer in para (b)(i)-(iii). [500] Their Honours continued (at [91]-[92]) that: determination of whether a person falls under para (b)(ii) of the definition of 'officer of a corporation' requires consideration of the role the person played in the management of the corporation. The inquiry is not limited to any particular issue or act which the person was involved in, and which is said to constitute a breach of duty. The text of para (b)(ii) is directed to those who have the capacity to affect significantly a corporation's financial standing: not just any capacity will suffice. Determining whether a person has such a capacity depends on identifying their role in relation to the corporation, what they did or did not do (whether on a particular occasion or over time) and the relationship between their actions or inaction and the financial standing of the corporation. The quality of a person's capacity or actions, and the effects of that capacity or those actions on the management of a corporation, are not necessarily uniform across corporations or corporate groups, or even uniform within a single corporation or group. The size of a corporation, the corporate structure, the management structure, and the identity and nature of the persons involved are likely to affect who is an officer of a corporation at any point in time. Circumstances may change over time, sometimes dramatically.

Misleading or deceptive conduct claim against Mr Ibrahim

1. Given my finding that the claim against Mr Ibrahim that he breached obligations as an officer of EMIS should fail, it is not strictly necessary for me to deal with the plaintiffs' claim that he engaged in misleading or deceptive conduct which caused Dr Kyatt and EMIS to enter into the Deed of Settlement. That is because Mr Ibrahim does not need to rely on the releases in cl 5.2 of the Deed of Settlement in his defence of the claim that he was an officer of EMIS. In case I am wrong in my conclusion that Mr Ibrahim was not an officer of EMIS, I have dealt with the misleading or deceptive conduct claim against him below.

The pleaded case

1. In essence, the plaintiffs plead in the FASOC at [31]-[33] that during the "Negotiation Period" from early July 2022 to 23 February 2023, Dr Kyatt, Mr Chaudhry and Mr Ibrahim entered into negotiations to have the New Lease assigned from Engadine Medical Imaging to EMIS, and that at this time Mr Ibrahim made each of the following representations: 1. The Engadine Practice was being run and operated in the usual manner. 2. Mr Ibrahim would continue to operate the Engadine Practice in the usual course after the New Lease had been assigned to EMIS. 3. Mr Ibrahim was not taking any steps to establish a Competing Business. 4. There was no Competing Business. 5. There would be no Competing Business. 6. The value of EMIS and the Engadine Practice and the medical equipment forming part of the Engadine Practice was and would remain substantial. 7. There will be no loss to EMIS by EMIS and Dr Kyatt consenting to the release as defined in the Deed of Settlement.
2. The Competing Business is defined in [5.4] of the FASOC to be the radiology practice trading as Focus Radiology Engadine located at and trading from 1-3 Station Street, Engadine (which is defined in this judgment as the Focus Engadine Premises).
3. In the FASOC at [34]-[37], the plaintiffs plead that these seven representations were express, partly in writing and partly through conduct with: 1. the written part contained in a letter dated 3 November 2022, an email dated 15 February 2023 at 1:56pm from Bridges Lawyers to New South Lawyers and reports and other documents issued by the Engadine Practice which contain the Engadine Premises address and the Focus Radiology logo; and 2. the conduct including the authorisation or approval of these documents, the request on 15 February 2023 for a wider release in the draft Deed and Mr Ibrahim's silence in failing to disclose two matters, being: 1. retaining and using for the benefit of himself and others and other than for the benefit of EMIS, particular confidential information or alternatively assisting Mr Chaudhry to do this ([25.10], [26.10] and [29.6] of the FASOC); and 2. establishing the Competing Business and using the confidential information and property for [his] benefit to the exclusion of EMIS and other than for the benefit of EMIS or alternatively assisting Mr Chaudhry to do this ([25.12], [26.12] and [29.8] of the FASOC).

Statutory provisions

1. Section 131(1) of the Competition and Consumer Act 2010 (Cth) (CCA) provides: Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations.
2. Schedule 2 to the CCA contains the Australian Consumer Law (ACL).
3. Section 18 of the ACL is within Chapter 2 of the ACL. Section 18(1) of the ACL provides: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
4. Section 4 of the ACL concerns misleading representations with respect to future matters and provides: (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Authorities

1. In Lin v Zheng [2023] NSWCA 174, Payne JA (with whom Bell CJ and White JA agreed) at [31]-[36] helpfully summarised the principles for determining whether conduct is misleading or deceptive or likely to mislead or deceive, particularly in relation to representations of a future matter, stating: [31] Conduct is misleading or deceptive or likely to mislead or deceive if it has a tendency to lead a person into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ). It is not necessary for a plaintiff to establish that a person engaging in misleading or deceptive conduct intended to mislead or deceive. The relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 at 197 per Gibbs CJ, 216 per Brennan J. [32] Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] per McHugh J. [33] In Butcher at [109] (followed by a majority of the High Court in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102]) McHugh J said: [109] The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 [of the then Trade Practices Act] has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. [citations omitted] [34] Section 4 of the Competition and Consumer Act 2010 (Cth) sch 2 - Australian Consumer Law (ACL) derives from s 51A of the predecessor to the ACL, the Trade Practices Act 1974 (Cth). Section 4 applies where a representation is made and that representation is with respect to a "future matter". As such, it places an evidential burden on the person who made the relevant representation to adduce evidence that there were reasonable grounds for making it. The term "future matter" is not defined in the ACL. Whether a statement related to a future matter depends upon the words used and the context in which they were used: Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 at [99]-[102]; Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162. A representation will only be with respect to a future matter if it is in the nature of a promise, forecast, prediction or other like statement about something that will only transpire in the future. [35] A statement of what the representor believes a future position will be may be a representation with respect to a future matter even if it implies a representation as to the representor's state of mind, depending on the words used and the context: Digi-Tech at [99]; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; [1998] FCA 1405. [36] There will not be reasonable grounds for making a representation if, at the time of making it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation: Australian Competition and Consumer Commission v Dateline Imports Pty Ltd (2015) 161 FCR 513; [2015] FCAFC 114 at [100]. The fact that a representor may believe in a particular state of affairs does not necessarily mean that there are reasonable grounds for that belief: Cummings v Lewis (1993) 41 FCR 559; [1993] FCA 190. Reasonable grounds for making a representation about a person's intention in relation to a future matter involve both an intention to perform the representation and an ability to perform it: Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200; see also HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [13], referring with approval to Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 238-239 and 240-241 per Ormiston J.

Silence

1. The particular role of silence or non-disclosure in a claim for misleading or deceptive conduct has been considered at length in the authorities dating back to s 52 of the Trade Practices Act 1974 (Cth), the predecessor provision to s 18(1) of the ACL.
2. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31, French CJ and Kiefel J at [16]-[23] outlined the following relevant principles in a case of silence as the basis for alleged misleading or deceptive conduct (footnotes omitted): [16] The circumstances in which silence or non-disclosure of information can be misleading or deceptive are various. The understanding of the place of silence or non-disclosure in the characterisation of conduct as misleading or deceptive was affected, in early decisions on s 52, by the view that the section was concerned with misrepresentations that would have been actionable under the general law. That view was linked to the proposition, expressed in Taco Co of Australia Inc v Taco Bell Pty Ltd, that conduct could not be misleading or deceptive for the purposes of s 52 unless it conveyed a misrepresentation. It was also linked to the proposition that at general law "mere silence, with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operate as an injury to the party from whom it is concealed". In the early development of the law about misleading or deceptive conduct, there were rather cautiously expressed views about the role of silence, albeit the importance of the statutory words was acknowledged. [17] The 1992 decision of the Full Court of the Federal Court in Demagogue Pty Ltd v Ramensky represented what has been described accurately as "an emphatic acknowledgement … of the unique nature of the statutory prohibition". The Full Court upheld the decision of the primary judge that a vendor of land had created a clear but erroneous impression in the purchasers that there was nothing unusual concerning access to the land and, in particular, had been silent as to the necessity of a grant of a licence by a statutory authority to enable such access. [18] Gummow J, who wrote the leading judgment and with whom Black CJ and Cooper J agreed, said: it should be no inhibition to giving effect to what, on its proper construction, is provided for in the legislation, that the result may be to achieve consequences and administer remedies which differ from those otherwise obtaining under the general law. Silence, as Black CJ said in his concurring judgment, was to be assessed as a circumstance like any other: the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. Gummow J referred to the limitation that "unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist". [19] The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus. [20] In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52. [21] To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute. In that connection, Robson AJA in the Court of Appeal spoke of s 52 as making parties "strictly responsible to ensure they did not mislead or deceive their customer or trading partners". Such language, while no doubt intended to distinguish the necessary elements of misleading or deceptive conduct from those of torts such as deceit, negligence and passing off, may take on a life of its own. It may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty "to act in a way which does not mislead or deceive". Cicero, in his famous essay On Duties, seems to have contemplated such a standard when he wrote: Holding things back does not always amount to concealment; but it does when you want people, for your own profit, to be kept in the dark about something which you know and would be useful for them to know. It would no doubt be regarded as an unrealistic expectation, inconsistent with the protection of that "superior smartness in dealing" of which Barton J wrote in W Scott, Fell & Co Ltd v Lloyd, that people who hold things back for their own profit are to be regarded as engaging in misleading or deceptive conduct. As Burchett J observed in Poseidon Ltd v Adelaide Petroleum NL, s 52 does not strike at the traditional secretiveness and obliquity of the bargaining process. But his Honour went on to remark that the bargaining process is not to be seen as a licence to deceive, and gave the example of a bargainer who had no intention of contracting on the terms discussed and whose silence was to achieve some undisclosed and ulterior purpose harmful to a competitor. [22] However, 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 the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case. [23] Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete.

Causation and remedies

1. The entitlement to claim damages arising from a contravention of s 18 of the ACL is contained in s 236 which relevantly states: (1) If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
2. A compensation order is also available to those persons who have suffered or are likely to suffer loss or damage because of conduct of another person in contravention of s 18 of the ACL, s 237 of the ACL relevantly stating: (1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because another person has engaged in conduct in contravention of a provision of Chapter 2, 3 or 4; or (b) … make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. Note: The orders that the court may make include all or any of the orders set out in section 243. (2) The order must be an order that the court considers will: (a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons. (3) An application under subsection (1) may be made at any time before the end of 6 years from the day on which the cause of action accrued that relates to the conduct referred to in that subsection.
3. The kinds of orders that may be made pursuant to s 237 of the ACL include those contained in s 243 of the ACL, such as a declaration that the whole or any part of a contract is void, an order varying a contract and an order refusing to enforce any or all of the provisions of a contract.
4. There must be a causal connection between the misleading or deceptive conduct and the loss or damage which is claimed in ss 236 and 237 of the ACL as both provisions require that the loss or damage be suffered "because of the conduct". This language replaced the previous expression "by conduct of". The causal connection is essentially a question of fact, to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12, Mason CJ (with whom Toohey and Gaudron JJ agreed) at 515; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55, Mason CJ, Dawson, Gaudron and McHugh JJ at 525.

Consideration

1. In my opinion, the plaintiffs' claim that Mr Ibrahim engaged in misleading or deceptive conduct must fail for multiple reasons.
2. First, I am not satisfied that any of the alleged representations were made by Mr Ibrahim to Dr Kyatt during the Negotiation Period from early July 2022 to 23 February 2023. I have set out my consideration of each of them in turn below: 1. The Engadine Practice was being run and operated in the usual manner. The evidence demonstrates that Mr Ibrahim was not running and operating the Engadine Practice after 12 February 2018, at which time he sold a 51% controlling interest in the Engadine Practice to Advanced Imaging. As a result, through Advanced Imaging's 51% unit holding in the Engadine Imaging Trust and the terms of the Engadine Trust Deed, Dr Kyatt took over the total control of the day-to-day management of the Engadine Practice. When Dr Kyatt left for Jordan in October 2019, Mr Chaudhry took over management of the Engadine Practice and assumed primary responsibility for the Engadine Practice's day-to-day operations. Mr Ibrahim was neither a director nor, as I have found, an officer of EMIS at any relevant time. Further, on 12 July 2022 at 8:00pm, Mr Ibrahim sent a letter by email to Dr Kyatt and Mr Chaudhry which, amongst other things, required EMIS to vacate the Engadine Premises. In this context, I find it inherently implausible that Mr Ibrahim made any "business as usual" representation as alleged during the Negotiation Period. In any event, if such a representation had been made by Mr Ibrahim, as I have stated above, Dr Kyatt agreed in cross-examination that from the time that the New Lease was entered into in July 2022 and throughout all of the negotiations in the background which led to the execution of the Deed of Settlement, EMIS continued to occupy the Engadine Premises, conduct the Engadine Practice in the same way and pay rent month-to-month, such that it was, in fact, "business as usual" in the Engadine Practice. This factual matter brings an end to any alleged reliance by Dr Kyatt on the asserted representation. 1. Mr Ibrahim would continue to operate the Engadine Practice in the usual course after the New Lease had been assigned to EMIS. I reject this alleged representation for the same reasons I have stated above in respect of the first alleged representation. The evidence establishes that Dr Kyatt had the right to total control of the Engadine Practice under the Engadine Trust Deed and in October 2019, Mr Chaudhry took over management of and responsibility for the Engadine Practice. Dr Kyatt removed Mr Chaudhry as a director of EMIS on 22 February 2023, the day before the Deed of Settlement was executed. In my assessment of the facts, Mr Ibrahim did not operate the Engadine Practice and there is no basis for him making the representation to Dr Kyatt that the latter alleged he did. Even if he did, at the time that Dr Kyatt executed the Deed of Settlement he was well aware that Mr Ibrahim would not be operating the Engadine Practice in the usual course. In any event, on 20 December 2022 at 5:33pm, Dr Kyatt sent an email to Mr Gasic, part of which said, "How now he says he has nothing to do with Engadine only having shares". That is a statement directly inconsistent with what Mr Ibrahim is alleged to have said, being that he would continue to operate the Engadine Practice in the usual course. 1. Mr Ibrahim was not taking any steps to establish a Competing Business. 2. There was no Competing Business. 3. There would be no Competing Business. I will consider each of the third, fourth and fifth alleged representations together. There is no evidence that any of these representations were made by Mr Ibrahim. Further, any suggested reliance on such alleged representations is defeated by Dr Kyatt's own evidence in the contemporaneous documents and the answers he gave in cross-examination. As I have found, from the time of Mr Ibrahim's letter of 12 July 2022, sent by email at 8:00pm, Dr Kyatt was well aware that Mr Ibrahim wanted to take the business of the Engadine Practice and run a business in place of it. I have also found that Dr Kyatt's refusal to concede that this would or would not be a competing business next to the Engadine Practice is of no importance. I further found that Dr Kyatt knew that from this time the Engadine Practice was existentially threatened by a practice that Mr Ibrahim wished to establish in place of it. Dr Kyatt also regarded Mr Ibrahim as a thief (email of 21 December 2022 at 5:03pm), a hijacker (email of 10 November 2022 at 4:31pm) and a robber. I have already found that in February 2023 Dr Kyatt regarded Mr Ibrahim as all of those things. I have also found, noting that in cross-examination Dr Kyatt conceded that in February 2023 there was nothing to stop Mr Ibrahim and Engadine Medical Imaging from acting in a way that might hurt the best interests of EMIS, Dr Kyatt truly believed that he could not trust anything that Mr Ibrahim or his lawyers said and by that time he thought that Mr Ibrahim could not do business with Dr Kyatt and would not reciprocate in their business relationship. As I have also found, the statement made by Dr Kyatt in his email of 20 December 2022 at 5:33pm - "[w]ho knows what they plan next, it look like they are preparing for something else as they failed with this attempt" - directly reflected Dr Kyatt's state of mind that although he did not know the detail of what Mr Ibrahim was planning he thought it would be another "attempt" to take the business of the Engadine Practice from EMIS. In the context of these multiple statements and my findings about Dr Kyatt's state of mind, I consider that Dr Kyatt did not rely on these alleged representations about a Competing Business. 1. The value of EMIS and the Engadine Practice and the medical equipment forming part of the Engadine Practice was and would remain substantial. The sixth alleged representation appears to be derived from the letter dated 3 November 2022 from Bridges Lawyers to New South Lawyers in which an offer was made on behalf of Mr Ibrahim to accept a payment of $700,000 (plus GST) to MI No. 2 as consideration for MI No. 2's 30 units in the Engadine Imaging Trust and the assignment of the New Lease. But in the letter of 21 November 2022 from New South Lawyers to Bridges Lawyers responding to this offer, the complaint was made that it was extraordinary that the offer had been made without any valuation evidence supporting the "substantial" value of the business and equipment. In cross-examination Dr Kyatt agreed that he gave instructions to Mr Bazouni to send this letter and approved its contents before it was sent. In my assessment, the response demonstrates that there was no reliance by Dr Kyatt on the value which had been assigned to EMIS and the Engadine Practice in the offer. The fact that Dr Kyatt held total control of EMIS and the Engadine Practice in accordance with the terms of the Engadine Trust Deed also make it inherently unlikely that Dr Kyatt would have relied on the amount of the offer in the letter of 3 November 2022. 1. There will be no loss to EMIS by EMIS and Dr Kyatt consenting to the Release as defined in the Deed of Settlement. The seventh alleged representation is said to arise from the email of 15 February 2023 from Bridges Lawyers to New South Lawyers to which was attached a further (third) version of the draft Deed which reinstated the previous form of the clauses that had been amended by New South Lawyers, and contained the statement that "there is no loss to your client to include this release". This statement was made in the context of the back-and-forth negotiations which were being conducted by Mr Ibrahim and Dr Kyatt through their respective lawyers about what they each would agree in the final form of the Deed of Settlement. As I have found, by November 2022 onwards Dr Kyatt truly believed that he could not trust anything that Mr Ibrahim or his lawyers said to him and he considered Mr Ibrahim to be a "thief" as a person. Dr Kyatt had his own lawyers advising him on his position. There is no evidence that Dr Kyatt in fact relied on this statement and I do not consider that he did so.

Confidential information claim against Mr Ibrahim

1. The plaintiffs allege in the FASOC at [19] that during the course of Mr Ibrahim managing and controlling the Engadine Practice and/or EMIS, he had access to confidential information including: 1. All communications with patients and doctors. 2. All communications with radiology equipment providers. 3. Each patient's and doctor's level of engagement with the Engadine Practice. 4. The activity of each business operating and comprising the Engadine Practice. 5. Information regarding pricing and costings. 6. Profit and loss information. 7. Referring doctors' names, addresses and contact information. 8. Patient names, addresses, and contact information. 9. The server system used by the Engadine Practice. 10. Engadine Practice turnover, total services provided and profitability data. 11. Sales activities, issues, opportunities, and strategies of the Engadine Practice. 12. Employee details of the Engadine Practice. 13. Cost and results of print advertising, online advertising, website, offers and promotions for the Engadine Practice. 14. Marketing and stationary resources used for the Engadine Practice. 15. Financial records and bank accounts used by the Engadine Practice.
2. Collectively these categories of information are defined in [19] of the FASOC as the "Confidential Information", which it is alleged in [20] of the FASOC was imparted to Mr Ibrahim in circumstances where he was aware that it had the nature of confidentiality.
3. The plaintiffs then plead in [21.1] of the FASOC that Mr Ibrahim owed a duty not to misuse the Confidential Information of EMIS and he had a duty in equity to that effect (which is defined as the "Duty of Confidentiality"). The conduct of Mr Ibrahim alleged in [25] of the FASOC to be in breach of the Duty of Confidentiality is that in the period commencing early 2019 and continuing, Mr Ibrahim without the knowledge, consent or authorisation of Dr Kyatt and/or EMIS: 1. Failed to exercise the option under the Lease on behalf of EMIS and permitted the Lease to expire in order for Engadine Medical Imaging to then obtain the New Lease of the Engadine Premises to the exclusion of EMIS, or alternatively assisting Mr Chaudhry to do this ([25.7]). 2. Induced or attempted to induce employees or contractors of EMIS, including those with whom he had regular dealings during his management of the Engadine Practice, or alternatively assisting Mr Chaudhry to do this ([25.8]). 3. Retained and used for the benefit of himself and others and other than for the benefit of EMIS the Confidential Information or alternatively assisted Mr Chaudhry to do this ([25.10]). 4. Canvassed, solicited and accepted approaches from customers of the Engadine Practice or alternatively assisted Mr Chaudhry to do this ([25.11]). 5. Established the Competing Business and used the Confidential Information and property for its benefit to the exclusion of EMIS and other than for the benefit of EMIS, or alternatively assisted Mr Chaudhry to do this ([25.12]).

Breaches of Corporations Act and fiduciary duties by Mr Chaudhry

Pleaded case

1. In the FASOC at [29], the plaintiffs plead that Mr Chaudhry has acted in breach of the duties in ss 180, 181, 182 and 183 of the Corporations Act and the following fiduciary duties: 1. to avoid and not pursue any situation or transaction in which there was or might be a conflict of interest with the duties owed to EMIS and/or Dr Kyatt's interests; 2. not to obtain any benefit, advantage or profit from the relationship with the Engadine Practice and/or EMIS, or from any opportunity or knowledge gained from it, for himself or another; and 3. to account to EMIS and/or Dr Kyatt for any benefit or gain obtained by him in breach of the duties in (1) and (2) above.
2. The plaintiffs plead in [29] of the FASOC that these breaches occurred in the period commencing early 2019 to date and involved Mr Chaudhry, without the knowledge, consent or authorisation of Dr Kyatt and/or EMIS, doing each of the following: 1. Failing to exercise the option under the Lease on behalf of EMIS and permitting the Lease to expire in order for Engadine Medical Imaging to then obtain the New Lease to the exclusion of EMIS, or alternatively assisting Mr Ibrahim to do this ([29.3]). 2. Inducing or attempting to induce employees or contractors of EMIS, including those with whom he had regular dealings during his management of the Engadine Practice, or alternatively assisting Mr Ibrahim to do this ([29.4]). 3. Retaining and using for the benefit of himself and others and other than for the benefit of EMIS, the Confidential Information, or alternatively assisting Mr Ibrahim to do this ([29.6]). 4. Canvassing, soliciting and accepting approaches from customers of the Engadine Practice, or alternatively assisting Mr Ibrahim to do this ([29.7]). 5. Establishing the Competing Business and using the Confidential Information and property for its benefit to the exclusion of EMIS and other than for the benefit of EMIS, or alternatively assisting Mr Ibrahim to do this ([29.8]). 6. Refusing and/or neglecting to sign documents to enable the New Lease to be assigned from Engadine Medical Imaging to EMIS ([29.9]).
3. In each case, there is no specificity in the FASOC as to which particular duty Mr Chaudhry is alleged to have breached by the relevant conduct.
4. In [30] of the FASOC, the plaintiffs provide a series of particulars to each of the allegations in [29]. In relation to the allegations in [29.3], [29.6], [29.7] and [29.9] the particulars that are provided at [30.3], [30.6], [30.7] and [30.9] respectively are the affidavit of Dr Kyatt sworn 24 April 2023, in two instances ([30.6] and [30.7]) in addition the affidavit of Ameer Al-Khigani affirmed 24 April 2023, and in each case "[f]urther particulars may be provided after the processes of discovery, subpoenas, notices to produce and the exchange of witness evidence".

Statutory provisions

1. Sections 180, 181, 182 and 183 of the Corporations Act provide: 180 Care and diligence - civil obligation only Care and diligence - directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. Note: This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence) - it does not operate in relation to duties under any other provision of this Act or under any other laws. (3) In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation. 181 Good faith - civil obligations Good faith - directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. 182 Use of position - civil obligations Use of position - directors, other officers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. 183 Use of information - civil obligations Use of information - directors, other officers and employees (1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Authorities

1. In Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789, Black J at [408]-[409] set out the applicable principles for an alleged contravention of s 180 of the Corporations Act as follows: [408] … In Australian Securities Commission v Gallagher above at 52-53, Pidgeon J observed that the test whether the statutory duty of care and diligence had been contravened was an objective one, that a director need not exhibit a greater degree of skill in the performance of his or her duties than may reasonably be expected for a person of his or her knowledge and experience, in the relevant circumstances, and that it was relevant to consider the way in which the work of the company was distributed between its directors and other officers, provided that distribution was reasonable. In Australian Securities and Investments Commission v Adler above at [372] (upheld by the Court of Appeal in Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1), Santow J noted that the duties imposed by the section are essentially the same as directors' duties at general law; that, in determining whether a director had exercised reasonable care and diligence, the test was what an ordinary person, with the director's knowledge and experience, might be expected to have done in the circumstances if he or she was acting on his or her own behalf; and that the duty of care and diligence would require special vigilance in a situation of potential conflict, requiring scrupulous concern on the part of those officers who become aware of that transaction to ensure that any necessary corporate approvals are obtained and safeguards put in place. That decision has been cited with approval in recent case law, including Parker v Tucker [2010] FCA 263; (2010) 77 ACSR 525 at [70] per Gordon J and Diamond Hill Mining Pty Ltd v Huang Jim Mining Pty Ltd [2011] VSC 288; (2011) 84 ACSR 616 at [90] per Croft J. [409] At first instance in Australian Securities & Investments Commission v Vines above, Austin J in turn noted (at [1058]-[1060]) that the section adopted an objective standard of care measured by reference to what a reasonable person of ordinary prudence would do, which could be more demanding in circumstances where the individual has been appointed by reference to a particular skill possessed by that individual. The Court of Appeal in Vines v Australian Securities & Investments Commission above in turn observed (at [141]-[145]) that the standard of care applicable to the statutory duty is similar to the general law duty and it is not necessary to establish a higher order of negligence in order to establish breach of that duty. In Australian Securities & Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, Austin J noted (at [7203]) that the statutory duty incorporates a minimum standard of diligence and (at [7242]) that the question in respect of a contravention of s 180(1) was whether a company officer failed to meet the standard of care and diligence, and this was to be assessed with regard to the circumstances existing at the relevant time, without the benefits of hindsight and with the distinction between negligence and mistakes or errors of judgment firmly in mind.

Consideration

1. Mr Chaudhry was a director of EMIS at all relevant times from 26 September 2019 until 22 February 2023 when he was removed by Dr Kyatt. As a result, in that period he owed the duties contained in ss 180, 181, 182 and 183 of the Corporations Act as well as fiduciary duties to EMIS. In relation to the allegations put by the plaintiffs, in closing submissions the plaintiffs identified the duties contained in ss 181 and 182 of the Corporations Act as central to their case.
2. The essence of the allegations made by the plaintiffs against Mr Chaudhry is that he conspired with Mr Ibrahim to the exclusion of Dr Kyatt to deprive EMIS of its lease of the Engadine Premises, established Focus Radiology and set in train Focus Radiology Engadine.
3. As I have found, in May 2022 the rebranding process of the Engadine Practice as part of the rebranding of the Woonona Practice, the Warrawong Practice, the Warilla Practice and the Dapto Practice to Focus Radiology was embarked upon by Mr Chaudhry, unbeknownst to Dr Kyatt, and substantially with the assistance of Ms Coles. Further, I have inferred that while the rebranding process was continuing in July 2022, Mr Chaudhry knew that Mr Ibrahim was undertaking the step of obtaining the New Lease in the name of Engadine Medical Imaging because the rebranding process to Focus Radiology was being coordinated by Mr Chaudhry and included the Engadine Practice located at the Engadine Premises.
4. By inference, I have found that the rebranding to Focus Radiology was discussed and agreed by Mr Ibrahim and Mr Chaudhry prior to 11 August 2022 and that Mr Ibrahim took active steps to take the business of EMIS and to set up the competing business on and from July 2022 to the knowledge of Mr Chaudhry.
5. From July 2022 onwards, Dr Kyatt worked to recover the lease of the Engadine Premises for EMIS, entering into drawn-out negotiations with Mr Ibrahim through their respective lawyers, ultimately resulting in the Deed of Settlement between them. This resulted in the rebranding process for the Engadine Premises to Focus Radiology coming to a halt in some respects from August 2022 until around November 2022 when it was revived. This is evidenced by the email on 15 August 2022 from Ms Coles sent to Focus staff, copied to Mr Chaudhry, with the subject line 'Referrals / Film Bags / Appointment Cards', informing them that new referrals, film bags and appointment cards were going to be delivered to the clinics in the coming week but warning that their use at the Engadine Premises should be held off and that they should "continue to use the [EMIS] stuff until further notice".

ISSUE 3: RELIEF

1. In light of the findings that I have made that none of the claims against Mr Ibrahim and Mr Chaudhry have been established it is not strictly necessary for me to make any findings about any relief that I might have granted to the plaintiffs if I had upheld one or more of their claims.
2. I do, however, want to make these comments about the way the case in relation to monetary relief was made, noting that the trial was held to deal with all issues of liability and relief.
3. I was not provided with any expert evidence on behalf of the plaintiffs to assist me in establishing the alleged value of EMIS but instead was asked to infer it from: 1. the amount paid in 2018 by Dr Kyatt for 51% of the Engadine Practice; plus 2. a further amount commensurate with the profit lost by EMIS.
4. I consider that this would be a highly unsatisfactory way in which to proceed to grant monetary relief in this case. Informing me that on 12 February 2018, Dr Kyatt paid $319,218.91 to Mr Ibrahim to acquire a 51% controlling interest in the Engadine Practice on behalf of Advanced Imaging tells me nothing about the value of those units in the Engadine Imaging Trust in 2024. Further, giving me profit and loss figures for EMIS in 2019, 2020, 2021 and 2022 does not provide me with any reliable indicator of what those units would be worth in 2024.
5. I agree with the closing submissions of Mr Ibrahim and Mr Chaudhry. The plaintiffs did not demonstrate by admissible evidence any loss which could support the claims against Mr Ibrahim and Mr Chaudhry.

ORDERS

1. For the reasons set out above, the plaintiffs have failed in their claims against Mr Ibrahim and Mr Chaudhry. They have also abandoned their claims against Engadine Medical Imaging, Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging and Warrawong Imaging. Accordingly, I propose to make the following orders: 1. The further amended statement of claim filed 18 July 2024 is dismissed. 2. The plaintiffs are to pay the costs of the defendants.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 November 2024