//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2025] NSWCA 269
respondent. Appeal dismissed with costs ([133]).
The Court of Appeal upheld the dismissal of EMIS’s claims. It found that the evidence did not show that Ibrahim played the kind of management role that would make him an officer of EMIS. It also found no adequate evidence that Chaudhry participated in the alleged conduct while he was still an EMIS director. The Court rejected the argument that silence about a competing business made the Settlement Deed misleading, given the circumstances of the negotiations and Kyatt’s knowledge of the risk. Because the alleged duties and breaches were not established, the constructive trust claim also failed. The appeal was dismissed with costs.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
2 cited instruments linked from this judgment.
2,369 words · generated 06/10/2026
EMIS operated a radiology practice at premises in Engadine. In February 2018, Advanced Imaging, controlled by Dr Kyatt, acquired a 51% controlling interest in EMIS. A company associated with Mena Ibrahim held a 30% unit interest in the trust for which EMIS acted as trustee ([13]). The Court’s account emphasises that control of the Engadine practice was allocated to Advanced Imaging under the trust deed, and that Kyatt initially exercised day-to-day management. After Kyatt moved to Jordan in 2019, Nabeel Chaudhry assumed primary responsibility for day-to-day operations, according to findings not challenged on appeal ([76], [80], [84]).
The lease at EMIS’s original premises expired in January 2022, after which EMIS occupied on a month-to-month basis. Ibrahim and Chaudhry pursued a lease proposal for LMI, a company in which they had interests but Kyatt did not. That proposal did not proceed ([20]). In July 2022, Ibrahim obtained a lease of the original premises for EMI, a company he controlled. He later arranged premises nearby for a competing business. The dispute led to a Settlement Deed dated 23 February 2023, including mutual releases and a recital describing Ibrahim’s interest in EMIS as limited to his interest through a unit holder ([27]–[31], [85]).
The alleged wrongdoing included obtaining the premises, setting up a competing practice, recruiting EMIS employees, and concealing or failing to disclose plans during the settlement negotiations. The Court acknowledged that some conduct was adverse to EMIS, that some matters were not disclosed, and that some conduct, including false public statements about relocation, involved sharp practice ([11], [33]–[36]). But it stressed that adverse conduct or competition did not, by itself, establish a cause of action. The appellants had to prove that the relevant duties existed and were breached.
At first instance, the claims were dismissed. The appeal principally challenged factual findings, Ibrahim’s officer status, alleged statutory and fiduciary breaches, the Settlement Deed, and the refusal to impose a constructive trust. The Court of Appeal dismissed the appeal with costs ([3]–[6], [133]).
The central issue was whether Ibrahim was an officer of EMIS under s 9 of the Corporations Act. The Court explained that officer status is functional. The question is what role the person actually played, and whether that role involved participation in significant corporate decisions, capacity significantly to affect financial standing, or influence of the kind captured by the statutory definition ([51]–[58]). Formal titles and isolated acts do not decide the question in isolation.
The appellants relied on a range of evidence. Ibrahim had signed an employee termination letter, corresponded with Chaudhry about the lease, proposed a distribution of trust funds, accessed EMIS financial information, and was involved in the rebranding and competing-business events. The Court did not treat those matters as irrelevant. It concluded, however, that they did not establish the necessary management role. The employment termination was a single instance, and evidence of Ibrahim’s role in a related settlement was not established. The lease email was an isolated exchange, more than a year before the relevant competing-business events; Chaudhry’s later renewal proposal differed from Ibrahim’s suggestion ([61]–[69]).
Similarly, Ibrahim’s email proposing a $300,000 distribution did not show that he made or participated in the decision. The trust deed assigned the distribution decision to Advanced Imaging, and the request itself was not proof of control ([71]–[75]). Access to Xero and financial documents was also insufficient. Information access could assist a unitholder to make informed decisions, but did not itself confer decision-making authority. The trust deed placed day-to-day management and strategic control with Advanced Imaging ([76]–[77]).
The Court considered the whole picture, including the unchallenged findings that Kyatt and later Chaudhry managed EMIS, and concluded the combined evidence still did not establish Ibrahim was an officer ([80]–[86]). The decision is therefore not that an investor or person with access to records can never be an officer. It is that the acts proved in this case, assessed against the corporation’s governance arrangements and actual management, did not satisfy the statutory test.
As to Chaudhry, the alleged breach depended on his involvement while he owed duties as a director. He was removed on 22 February 2023. Evidence of recruitment and the Crowd IT proposal came after that date. The Court found no adequate evidence that he had actively helped obtain the lease or establish EMI’s competing business before removal ([97]–[110]). It also declined to attribute all of Coles’s conduct to Chaudhry, given evidence that she worked across businesses associated with both Ibrahim and Chaudhry and that the relevant evidence linked her work on EMI’s competing business to Ibrahim ([46], [91], [100]).
The Court reiterated that Jones v Dunkel did not permit the court to fill evidentiary gaps. A missing witness may support an inference that is already available from the evidence, but cannot itself establish positive facts with no evidentiary foundation ([25], [109]–[110]). This was important because the appellants argued that the absence of evidence from respondents or Coles supported broader findings of concerted conduct.
The misleading-conduct claim also failed. The asserted express representations about whether there would be a competing business were not shown to have been made. The Court accepted that Kyatt knew Ibrahim wanted to take the Engadine business and was suspicious of him. In the circumstances of arm’s-length settlement negotiations, with both sides advised, there was no reasonable expectation Ibrahim would disclose plans adverse to his own interests ([120]–[126]). The Court did not need to decide whether a different disclosure obligation might arise if Ibrahim had been an officer, because officer status had not been established ([122]–[126]).
Finally, the constructive trust claim depended on establishing relevant duties and breaches. As those foundational elements were not proved, the claim could not succeed ([112]).
The judgment does not announce a new statutory definition of “officer”. It applies the existing functional approach associated with s 9 of the Corporations Act and the High Court decisions in Shafron and Australian Securities and Investments Commission v King ([51]–[58]). The Court’s contribution is principally an application of those authorities to a detailed factual record involving trust ownership, delegated management, accounting access, lease discussions and competition.
Before the appeal, the primary judge had found Ibrahim was not an officer, Chaudhry had not breached duties, and the alleged misleading conduct was not established. The Court of Appeal left those findings undisturbed. It emphasised that multiple discrete acts can be assessed cumulatively, but their number does not substitute for proof of a significant management role. In this case, the trust deed and evidence of who actually managed EMIS were central to the assessment ([76]–[84]).
The judgment also applies established limits on Jones v Dunkel. The rule remains available to support an inference grounded in the evidence, but does not operate as a substitute for evidence or justify filling gaps in proof ([25], [109]–[110]). The Court applied that limit both to alleged concerted conduct and to the proposed attribution of staff-recruitment steps.
On fiduciary duties after office ends, the Court referred to the general proposition that such duties generally do not continue after the fiduciary relationship ends, while noting a possible exception where a director resigns to perfect a breach already commenced. It did not extend that exception to a director removed from office ([100]). That discussion was relevant to Chaudhry’s post-removal conduct, but the Court’s conclusion rested principally on the absence of proof of actionable involvement while he remained a director.
On misleading conduct, the judgment applies the contextual approach to silence and non-disclosure. It also accepts that non-reliance and disclaimer clauses can have evidentiary significance, but cannot simply absolve a party from statutory liability where the elements of misleading conduct are otherwise established ([125], [130]–[132]). The Court considered the disclaimer issue unnecessary to the outcome because the other elements were not established.
At [12], Black J said that, unless Ibrahim owed duties preventing him, he and others were free to compete with EMIS, even if competition diminished or deprived EMIS of business. In plain English, a competitor’s conduct can be harmful or sharp without automatically being a breach of duty. The claimant must first establish the legal relationship that imposes the relevant constraint.
At [69], the Court observed: “A director who accepts a suggestion from another person does not necessarily act under instruction.” The surrounding point was that Chaudhry’s acceptance of a lease suggestion did not establish that EMIS’s directors were accustomed to act on Ibrahim’s wishes. A proposal being accepted once, particularly where later action differs, is not necessarily evidence of control.
At [84], the Court held that the evidence, considered as a whole, still did not establish Ibrahim was an officer. This is a useful reminder that officer status is not determined by counting acts. The nature, significance and context of the person’s role matter.
At [109], the Court explained the limit of Jones v Dunkel: an inference may be drawn more readily where the evidence supports it, but not without an evidentiary basis. In plain English, a party’s failure to call a witness does not prove the opposing party’s theory by itself.
At [121], the Court found there was no reasonable expectation that Ibrahim would disclose his plans during the settlement negotiations. The Court’s conclusion depended on the context: the parties were negotiating at arm’s length, Kyatt was suspicious, and the plans were adverse to Ibrahim’s interests. The judgment does not establish that silence in negotiations is always permissible; it identifies why silence was not actionable on these facts.
At [132], the Court acknowledged that the primary judge’s treatment of the disclaimer could have been overstated if the clause were regarded as an “insurmountable obstacle”. But the Court did not decide the appeal on that point. The claim failed for other reasons, including the absence of established officer status and the lack of proof of actionable representations or reliance.
The judgment is most relevant to disputes where a person’s status as an officer is inferred from conduct rather than formal appointment. It directs attention to the person’s actual role, authority, participation in significant decisions and capacity to affect financial standing. Evidence such as access to accounts, communications with a director, requests for distributions or occasional involvement in staffing may form part of the picture, but the judgment shows that those facts may be insufficient without proof of a broader management role ([51]–[58], [61]–[84]).
It is also relevant where corporate governance documents allocate management authority to one shareholder or entity, while another investor has access to financial information or participates in discussions. The Court considered the trust deed’s allocation of control significant, but not automatically conclusive of every possible officer-status question. It assessed the documents together with evidence about actual management ([76]–[84]).
The Jones v Dunkel discussion matters where a party asks the court to infer involvement from a respondent’s failure to give evidence, or from the absence of a witness. The judgment distinguishes between drawing an inference supported by proved facts and using silence to supply the missing facts themselves ([25], [109]–[110]).
The duty analysis is relevant where alleged conduct spans periods before and after a director’s removal. The Court focused on when the conduct occurred and whether the person still owed duties at that time. It found that evidence of post-removal recruitment did not establish breach of duties owed while Chaudhry was a director ([97]–[100]).
The misleading-conduct reasoning concerns settlement negotiations between parties with opposing interests, where one party alleges that silence about future competition was misleading. Relevant features here included the absence of proven express representations, the parties’ arm’s-length position, legal advice, Kyatt’s suspicion, and his awareness of the risk to EMIS ([120]–[129]). The outcome should not be read as a general rule that silence in commercial negotiations cannot mislead.
The judgment is dated 16 December 2025. The materials supplied contain no later decisions applying, distinguishing or otherwise treating Engadine Medical Imaging Services Pty Ltd atf The Engadine Unit Trust v Mena Ibrahim & Ors. No later-treatment history can therefore be identified from the judgment text provided.
The authorities discussed in this appeal are earlier cases, not later treatment of this judgment. The Court applied Shafron and ASIC v King to the officer-status question ([51]–[58]), used Jones v Dunkel in addressing inferences from absent witnesses ([25], [109]–[110]), and referred to existing appellate authority on review of factual findings ([49]). It also applied established authorities on fiduciary duties after office ends and on misleading conduct and contractual disclaimers ([100], [119]–[132]).
The Court expressly left open whether a reasonable expectation of disclosure would have arisen if Ibrahim had been an officer of EMIS. Because officer status was not established, the Court did not need to decide that hypothetical question ([122]–[126]). It also did not resolve the broader question of whether positive duties of a company director may have a fiduciary character in the circumstances discussed in the cited authorities ([126]).
The Court did not decide whether the Settlement Deed’s disclaimer would independently defeat an otherwise established claim. It explained that a disclaimer may have evidentiary effect, but cannot simply contract out of statutory liability. It then treated the question as unnecessary because other elements of the claim were not established ([130]–[132]).
The judgment also notes, without resolving in detail, the possible exception to the general rule that fiduciary obligations do not continue after the relationship ends, where a director resigns to perfect a breach already commenced. The Court held only that it saw no reason to extend that exception to a director removed from office ([100]).
The reasons are fact-specific on the attribution of Coles’s work and Chaudhry’s involvement. The Court found the evidence did not establish that her recruitment conduct for EMI was attributable to Chaudhry, and that the Crowd IT proposal did not prove his pre-removal involvement. It did not decide a general rule about when an employee’s conduct should be attributed to a particular director or business ([46], [100], [107]–[110]).
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Engadine Medical Imaging Services Pty Ltd atf The Engadine Unit Trust v Mena Ibrahim & Ors [2025] NSWCA 269
Hearing dates: 18 and 19 November 2025
Date of orders: 16 December 2025
Decision date: 16 December 2025
Before: Payne JA at [1]
Stern JA at [2]
Black J at [3]
Decision: Appeal dismissed with costs.
Catchwords: APPEALS — from finding of fact — documentary evidence —contemporaneous correspondence — logic of events — inferences from objectively determined facts — application of rule in Jones v Dunkel — whether primary judge erred in making factual findings
CORPORATIONS — directors and officers — whether first respondent was an officer of the first appellant — upheld primary judge’s finding that first respondent was not an officer of the first appellant
CORPORATIONS — statutory duties under ss 180–183 of the Corporations Act 2001 (Cth) — fiduciary duties — whether first and second respondents breached fiduciary and statutory duties owed to first appellant — upheld primary judge’s finding that no breach of duties established — held that first respondent did not owe duties to the first appellant — held that second respondent not involved in alleged conduct at relevant time
EQUITY — trusts and trustees — constructive trusts — whether constructive trust should be ordered over first and second respondent’s competing business — held that no breach of duties established — no basis for constructive trust
CONSUMER LAW — misleading or deceptive conduct — whether deed of settlement executed by reason of misleading or deceptive conduct by first respondent — where first respondent negotiated deed on behalf of own interests — held that first respondent’s conduct was not misleading or deceptive
Legislation Cited: - Australian Consumer Law, s 237
- Corporations Act 2001 (Cth), ss 9, 9AC–9AD, 180–183, 1317H
Cases Cited: - Attorney-General v Blake [1998] Ch 439; [1998] 1 All ER 833
- Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580; [2016] NSWCA 347
- Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; (2007) 62 ACSR 427; [2007] FCA 963
- Australian Securities and Investments Commission v King (2020) 270 CLR 1; [2020] HCA 4
- Bauer Media Pty Ltd v Wilson (No 2) (2018) 56 VR 674; [2018] VSCA 154
- Best v Rosamond [2020] NSWCA 90
- Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
- Diakovasili v Order of AHEPA NSW Inc [2023] NSWSC 1282
- Engadine Imaging Services Pty Ltd as trustee for the Engadine Unit Trust v Ibrahim [2024] NSWSC 1399
- ET-China.com International Holdings Ltd v Cheung (2021) 150 ACSR 461; [2021] NSWCA 24
- Fox v Percy (2013) 214 CLR 118; [2003] HCA 22
- Gestmin SGPS SA v Credit Suisse UK Ltd [2013] EWHC 3560 (Comm)
- Grimaldi v Chameleon Mining (No 2) (2012) 200 FCR 296; [2012] FCAFC 6
- Jones v Dunkel (1959) 101 CLR 298
- Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458
- Lin v Zheng [2023] NSWCA 174
- Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167
- Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31
- Morley v Australian Securities and Investments Commission (2010) 274 ALR 205; [2010] NSWCA 331
- P&V Industries Pty Ltd v Ponto [2007] VSC 64
- Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31
- Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222; [1999] 1 All ER 517
- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789
- Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; (2012) 88 ACSR 126; [2012] HCA 18
- Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1; [2003] SASC 318
- South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69
- Touma v Highfields Australia Pty Ltd [2024] NSWCA 160
- Viterra Malt Pty Ltd v Cargill Australia Ltd (2023) 74 VR 1; [2023] VSCA 157
- Watson v Foxman (1995) 49 NSWLR 315
- Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 89 ACSR 1; [2012] WASCA 157
- Wormald v Maradaca Pty Ltd [2020] NSWCA 289
- Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132; [2023] NSWCA 48
Texts Cited: C Lockhart, The Law of Misleading or Deceptive Conduct, 6th ed, 2023
Category: Principal judgment
Parties: Engadine Medical Imaging Services Pty Ltd atf The Engadine Unit Trust (First Appellant)
Ali Kyatt (Second Appellant)
Advanced Imaging Pty Ltd atf The Kyatt Family Trust (Third Appellant)
Mena Ibrahim (First Respondent)
Engadine Medical Imaging Pty Ltd (Second Respondent)
Nabeel Chaudhry (Third Respondent)
Representation: Counsel:
MR Pesman SC / M Klooster (Appellants)
MK Condon SC / M Collins (First and Second Respondents)
GA Sirtes SC / F Di Lizia (Third Respondent)
Solicitors:
New South Lawyers (Appellants)
Bridges Lawyers (First and Second Respondents)
Madison Marcus Law Firm (Third Respondent)
File Number(s): 2024/444848
[This headnote is not to be read as part of the judgment]
Between 2009 and 2023, Engadine Medical Imaging Service Pty Ltd (“EMIS”) conducted a radiology business in premises at Engadine, NSW (“Original Premises”) as trustee for a trust. From February 2018, Dr Ali Kyatt held the majority of shares in EMIS and the majority interest in the trust and Mr Nabeel Chaudhry and Mr Mena Ibrahim held minority interests in EMIS and the trust. Dr Kyatt, Mr Chaudhry and Mr Ibrahim also owned and operated other radiology businesses in South Sydney.
EMIS’s lease at the Original Premises expired in January 2022 and it then occupied those premises on a month-to-month basis. From February 2022, Mr Chaudhry and Mr Ibrahim took steps to negotiate a lease of the Original Premises for a separate company, Loan Medical Imaging Pty Ltd (“LMI”), in which they, but not Dr Kyatt, had an interest. That proposal did not progress.
In July 2022, Mr Ibrahim obtained a lease over the Original Premises for a company which he owned, Engadine Medical Imaging Pty Ltd (“EMI”). After he was not successful in persuading the lessor of the Original Premises to require EMIS to vacate the premises, EMI leased premises (New Premises) in close proximity to the Original Premises. The dispute between Dr Kyatt, Mr Ibrahim and Mr Chaudhry which resulted from these developments was subject to a Settlement Deed in February 2023, which relevantly included a recital as to Mr Ibrahim’s role in the trust and mutual releases as between the parties and provided for an assignment of the lease over the Original Premises to EMI. EMI subsequently recruited most of EMIS’ employees who EMIS resigned and commenced work at EMI, and EMIS ceased trading by March 2023.
At first instance, the Plaintiffs (now the Appellants) contended that: Mr Chaudhry had breached fiduciary duties and duties imposed by the Corporations Act 2001 (Cth) (“Act”) as a director of EMIS; that Mr Ibrahim was an officer of EMIS and had breached fiduciary duties and duties under the Act and that he engaged in misleading or deceptive conduct under the Australian Consumer Law in relation to the Settlement Deed; and that Mr Chaudhry and Mr Ibrahim had breached their duties of confidentiality owed to EMIS. The Primary Judge (McGrath J) rejected these arguments and dismissed the proceedings.
The Appellants primarily challenge the Primary Judge’s factual findings by six grounds of appeal: (i) whether the Primary Judge adopted the correct approach to evidence and certain factual findings contained in a schedule to the First Further Amended Notice of Appeal, including the finding that Mr Ibrahim was an officer of EMIS; (ii) whether the Primary Judge erred in dismissing the Appellants’ claim for a constructive trust over EMI’s business; (iii) whether the Primary Judge erred in dismissing the Appellants’ claims against the Respondents; (iv) whether the Primary Judge erred in his approach to construing evidence related to the Settlement Deed and the claim for misleading or deceptive conduct; (v) whether the Primary Judge erred by failing to find that Mr Ibrahim breached duties under the Act and fiduciary duties; and (vi) whether the Primary Judge erred by failing to find that Mr Chaudhry breached duties under the Act and fiduciary duties.
The Court (Black J and Payne and Stern JJA agreeing) held, dismissing the appeal:
As to grounds (i), (v) and (vi)
(1) The Primary Judge did not err in his approach to deriving factual findings. The challenged findings identified in the schedule were properly made by reference to documentary evidence including contemporaneous communications, the logic of events, and inferences appropriately made by application of the rule in Jones v Dunkel (1959) 101 CLR 298.
(2) The Primary Judge was correct in holding that it was not established that Mr Ibrahim was an officer of EMIS at the relevant time. Consequently, Mr Ibrahim did not owe duties under the Act or fiduciary duties to EMIS at that time.
(3) The Primary Judge did not err in concluding that Mr Chaudhury had not breached the duties he owed to EMIS as a director as he was not shown to have been involved in the impugned conduct until after he was removed as a director of EMIS.
As to grounds (ii) – (iii)
(4) The grounds of appeal concerning issues (ii) – (iii) depended on the Appellant’s success in establishing that Mr Ibrahim and Mr Chaudhry had breached duties owed to EMIS. Consequent on the court’s findings in relation to issues (i), (v) and (vi), the Primary Judge did not err in refusing to order a constructive trust over EMI’s business or dismissing the claims against the Respondents because it was not established that either Mr Ibrahim or Mr Chaudhry breached duties owed to EMIS.
As to ground (iv)
(5) The Primary Judge did not err in holding that it was not established that Mr Ibrahim had engaged in misleading or deceptive conduct in relation to the Settlement Deed. Mr Ibrahim had not made representations to Dr Kyatt in respect of his plans for a competing business and Mr Ibrahim was under no duty to disclose matters adverse to Mr Kyatt’s interest in that negotiation.
PAYNE JA: I agree with the orders proposed by Black J and with his Honour’s reasons.
STERN JA: I agree with Black J and with his Honour’s reasons.
BLACK J: By a First Further Amended Notice of Appeal, filed by leave on 24 November 2025 after the conclusion of oral submissions on the appeal, the Appellants, Engadine Medical Imaging Services Pty Ltd (“EMIS”) and others appeal from orders made by the Primary Judge (McGrath J) on 6 November 2024. His Honour there ordered that the proceedings at first instance be dismissed with costs, for the reasons set out in a lengthy judgment (Engadine Imaging Services Pty Ltd as trustee for the Engadine Unit Trust v Ibrahim [2024] NSWSC 1399) (“Judgment”). This appeal primarily raises challenges to the facts found by the Primary Judge and the Appellants seek substantive orders that they contend would follow from the making of different findings of fact. Although I will address the applicable legal principles below, there is little or no contest about them in the appeal.
The proceedings concerned the circumstances in which Second Respondent, Engadine Medical Imaging Pty Ltd (“EMI”), a company controlled by the First Respondent, Mr Ibrahim, obtained a lease over premises at Engadine (“Original Premises”) occupied by EMIS; the status of a Deed of Settlement and Release dated 23 February 2023 between EMI, Mr Ibrahim, EMIS and Dr Kyatt (“Settlement Deed”) executed following a dispute concerning that lease; and steps subsequently taken by EMI, not long after the Settlement Deed was executed, to establish a competing business to that conducted by EMIS (“Competing Business”) in nearby premises (“New Premises”) and employ many of EMIS’s previous staff in that business.
The Further Amended Notice of Appeal, in the form filed with leave by the Appellants at the commencement of the appeal, did not raise any challenge to the Primary Judge’s findings as to whether Mr Ibrahim and the Third Respondent, Mr Chaudhry, had breached the duties which the Appellants contended they owed to EMIS. That omission may have had the consequence that the appeal could not have succeeded irrespective of the result as to the other matters raised on appeal. The Respondents had highlighted that omission in written submissions prior to the hearing and returned to it in oral submissions. Shortly after oral submissions in the appeal had concluded, the Court permitted the Appellants to file their First Further Amended Notice of Appeal (which was in fact their Second Further Amended Notice of Appeal), by which the Appellants contended that the Primary Judge should have found only two of the several breaches alleged against Mr Ibrahim and Mr Chaudhry by their Further Amended Statement of Claim (“FASOC”) filed on 18 July 2024. We took that course because the Respondents can hardly have been caught by surprise, despite the omissions in the Further Amended Notice of Appeal, by the fact that the Appellants sought on appeal, at least in part, the findings of breach that they had unsuccessfully sought at first instance. Allowing the amendment did no more than leave the Respondents to address a narrower case of breach than had been brought against them at first instance. It would hardly have served the interests of justice to determine the appeal, after two hearing days, on the basis that the omissions in the Further Amended Notice of Appeal had the consequence that the appeal could never have succeeded irrespective of any underlying factual or legal merit.
The Appellants sought a range of relief against Mr Ibrahim at first instance. Broadly, they contended that Mr Ibrahim was an officer of EMIS for the purposes of s 9 of the Corporations Act 2001 (Cth) (“Act”) or its successor provision, s 9AD of the Act, which took effect after the events in issue; that he engaged in conduct in breach of fiduciary duties owed to EMIS and in breach of ss 180–183 of the Act; and they sought compensation under s 1317H of the Act and other relief against Mr Ibrahim on that basis. The Appellants also brought a claim for misleading or deceptive conduct and sought an order under s 237 of the Australian Consumer Law comprised in Schedule 2 of the Competition and Consumer Act 2010 (Cth) setting aside or varying the Settlement Deed. The Appellants also brought claims against the Second Respondent, EMI, but did not press those claims in closing submissions at first instance. The Appellants also brought claims against Mr Chaudhry, contending that he was a director of EMIS within the meaning of s 9 of the Act or its successor provision, s 9AC of the Act, and had also breached fiduciary duties and ss 180–183 of the Act. Claims against several other Defendants were abandoned in the FASOC.
The Primary Judge reviewed the evidence led by the Second Appellant, Dr Kyatt, and noted the applicable principles in respect of the assessment of the credit of a witness and the difficulties which arise where a witness gives evidence after disputes have arisen, referring to the often cited decision in Watson v Foxman (1995) 49 NSWLR 315 and to the approval of that decision in Touma v Highfields Australia Pty Ltd [2024] NSWCA 160. The Primary Judge noted at ([14]) that he had formed an adverse view as to the credibility of Dr Kyatt and the reliability of his evidence. Mr Pesman, with whom Mr Klooster appeared for the Appellants, indicated in oral submissions on appeal that the Appellants do not challenge the Primary Judge’s credit findings in respect of Dr Kyatt. The Primary Judge also noted that Mr Ibrahim and Mr Chaudhry did not give evidence. Ms Coles, a member of the staff of the businesses that Mr Chaudhry and Mr Ibrahim owned at various times, also did not give evidence and the Primary Judge had regard to the principle in Jones v Dunkel (1959) 101 CLR 298 (“Jones v Dunkel”) in that regard.
The Primary Judge then outlined the relevant facts in a very detailed review of the chronology of events that extended to nearly 100 pages in the Judgment. His Honour reached further findings as to aspects of the evidence given by Dr Kyatt and also reached a number of findings that were adverse to the Respondents. I will more briefly set out the relevant chronology below. The Primary Judge then turned to the claims against Mr Ibrahim by addressing the question whether Mr Ibrahim was an officer of EMIS and then the misleading or deceptive conduct claim against Mr Ibrahim. His Honour’s findings as to those claims are challenged in this appeal. His Honour then addressed the claims against Mr Chaudhry, relevantly, for breach of director’s duties under the and for breach of fiduciary duties. His Honour briefly addressed the question of relief, which did not strictly arise where he had found that the Appellants had not established their case and then made the orders dismissing the proceedings and as to costs which I noted above.
As I noted above, the Primary Judge undertook a very detailed review of events in the Judgment and, in submissions on appeal, the Appellants addressed the chronology of events at length. The Appellants fairly recognised that the Primary Judge had addressed all or substantially all of the relevant events and documents in the Judgment but submitted that his Honour had not drawn inferences that should properly be drawn from them. The Appellants contend, in substance, that the Primary Judge was incorrect in his findings as to some matters and in not drawing further inferences favourable to the Appellants from those matters.
I will address specific aspects of that challenge in dealing with the chronology below before turning to several wider aspects of that challenge. I will here identify many of the documents to which the Appellants referred, without seeking to repeat the Primary Judge’s detailed and accurate analysis of them. While a review of these events and documents is necessary given the factual issues raised in the appeal, its limitations should be recognised. It was plain enough that Mr Ibrahim and Mr Chaudhry were both involved, in different ways and possibly at different times, in events which had the consequence that EMIS retained a lease over the Original Premises but lost the staff that had previously worked for it and that EMI opened the Competing Business in the New Premises. Those events were plainly disadvantageous to EMIS and to Dr Kyatt. Significant aspects of them were not disclosed to EMIS or Dr Kyatt. Some aspects of them appear to have been actively concealed from EMIS and Dr Kyatt and some aspects of them involved misleading conduct, including false representations to the public that the business had moved from the Old Premises to the New Premises.
However, it is important to recognise that the Primary Judge was required to determine the claims that were pressed at the hearing before him, relating to breach of officer’s and director’s fiduciary and statutory duties, which depended, on the part of Mr Ibrahim, on his being an officer of EMIS and, on the part of Mr Chaudhry, on his acting in a manner that was contrary to his duties to EMIS at a time that he remained a director of EMIS. The Appellants’ claim for misleading or deceptive conduct in respect of the Settlement Deed also depended on the claim that Mr Ibrahim was an officer of EMIS. One should not forget that, unless Mr Ibrahim owed duties to EMIS which prevented him from doing so, he and any other third party were free to set up a new business in competition with EMIS, in a manner that may diminish or deprive EMIS of its existing business. After a review of these events and documents, it will be necessary to consider whether the Primary Judge erred in concluding that they did not establish the causes of action on which the Appellants relied.
Turning now to the chronology of events, EMIS conducted a radiology practice trading at the Original Premises. On 12 February 2018, the Third Appellant (“Advanced Imaging”), controlled by Dr Kyatt, acquired a 51% controlling interest in EMIS for $319,218.91. The lease of the Original Premises was assigned to EMIS in that sale and had a term to 31 January 2022. EMIS subsequently conducted that business as trustee, under a trust deed dated 1 February 2018 between Advanced Imaging, companies associated with Mr Ibrahim and Mr Chaudhry and EMIS as trustee. After Dr Kyatt acquired the controlling interest in the Engadine Imaging Trust, of which EMIS was trustee, MI No 2 Family Pty Ltd (“MI No 2”), a company controlled by Mr Ibrahim, remained a 30% unitholder of the trust.
“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.”
This exchange is significant in two respects. First, there is no suggestion that Dr Kyatt then objected to that approach, and he plainly understood that a third party could take steps to hire staff away from a radiology practice and establish a competing practice because he had himself acquiesced in that strategy to the potential disadvantage of the then operators of the Dapto practice. He cannot have been caught by surprise when EMIS later became the victim of a strategy that he was prepared to deploy against others. Second, Mr Ibrahim also knew of that strategy and it was later adopted by EMI in hiring staff away from EMIS.
The Appellants point out, and the Primary Judge recognised (Judgment [80]), that from 12 March 2020, Mr Ibrahim was given unrestricted access to EMIS’s Xero accounting system. Obviously enough, access to information concerning a company’s business does not in itself allow a capacity to control that business. I return to that issue below.
The Appellants also refer to the circumstances in which the employment of an employee of the Engadine practice was terminated by a letter signed by Mr Ibrahim, as recognised by the Primary Judge (Judgment [92]ff). The Appellants submit, and I accept, that Mr Ibrahim was also shown as the contact point in a settlement agreement in respect of an employment claim subsequently brought by that employee, a matter to which the Primary Judge did not refer. The status of the latter document is uncertain where it is in evidence as signed by the former employee but not by EMIS.
On 17 August 2021, Mr Chaudhry asked Mr Ibrahim how he would like to reply to correspondence from the lessor’s real estate agent as to renewal by EMIS of the lease over the Original Premises (“Original Lease”). On 18 August 2021, Mr Ibrahim sent a draft response to Mr Chaudhry and Mr Chaudhry subsequently sent that email unaltered to the agent. On 25 November 2021, Mr Chaudhry sent an instruction to Mr Inayat seeking to bring about a renewal of the lease, but then for a shorter period than originally suggested by Mr Ibrahim and previously proposed by Mr Chaudhry to the agent. It appears those steps did not lead to the renewal of that lease although the evidence before the Primary Judge, and on appeal, does not show why that did not occur.
On 23 February 2022, Mr Ibrahim sent Mr Chaudhry a draft of a proposed communication to the lessor’s estate agent which sought a lease of those premises for Logan Medical Imaging Pty Ltd (“LMI”), in which Mr Ibrahim and Mr Chaudhry but not Mr Kyatt had an interest, and improperly sought to redirect correspondence from the lessor away from Mr Inayat as EMIS’s accountant in doing so. Mr Chaudhry responded that that email was “perfect” and advised a further email address for the estate agent to which it should be sent. Mr Ibrahim then sent that email to the lessor’s real estate agent and that agent conveyed the proposal to the lessor and wrongly described Mr Ibraham as the existing tenant in doing so. It is plain enough that Mr Ibrahim was there acting for himself or LMI and not for EMIS and that this action was adverse to EMIS. This conduct may be the high point of EMIS’s claim for breach of duty against Mr Chaudhry although it has the difficulty that that proposal did not go forward. LMI did not acquire a lease of the premises and EMI, in which Mr Ibrahim and not Mr Chaudhry had an interest, subsequently acquired a lease of the premises.
“I can’t believe that you went behind my back and got the lease! I’ve worked really hard at Engadine and this is what you have done. I will be seeking legal advice!”
“Rizwan, Mena has taken the Lease at Engadine!!
I thought the lease was renewed?
What are our options? We need to seek legal advi[c]e urgently!!”
The fact that Mr Chaudhry was consulting with Mr Inayat in relation to the lease of the [Original] Premises in July 2022 (whether or not this consultation was sincere, or a disingenuous performance intended for Dr Kyatt) indicates that Mr Inayat continued to serve as the accountant for EMIS and the Engadine Practice, contrary to what had been communicated by Mr Ibrahim to All Star Property Group in Mr Ibrahim’s email of 25 February 2022 (referred to above). Mr Chaudhry had been copied to that email and had also been sent the email in draft form before it was sent to All Star Property Group.
In light of the February 2022 correspondence with All Star Property Group and the Focus Radiology rebranding project which was occurring at this time, I was invited by the [P]laintiffs to infer that the emails sent by Mr Chaudhry on 12 July 2022 were “theatre” for the benefit of Dr Kyatt and intended to conceal Mr Chaudhry’s true involvement in steps taken by Mr Ibrahim to procure the New Lease of the Engadine Premises on behalf of Engadine Medical Imaging. The available inference I draw is that Mr Chaudhry knew that Mr Ibrahim was taking steps to obtain the New Lease in the name of [EMI] because the Focus Radiology rebranding process was being coordinated by Mr Chaudhry and included the Engadine Practice located at the Engadine Premises. However, there is no conclusive evidence that Mr Chaudhry was directly or actively involved in obtaining the New Lease and I cannot use a Jones v Dunkel inference to fill gaps in the evidence.”
The first of the inferences drawn by the Primary Judge is not challenged on appeal by Mr Ibrahim or Mr Chaudhry. The second finding is challenged, so far as the Plaintiffs seek to have wider findings made as to Mr Chaudhry’s involvement, to which I return below.
Further correspondence followed in respect of the proposed rebranding. Mr Ibrahim subsequently sought, without success, to persuade the lessor of the Original Premises to obtain possession of the premises from EMIS; when the lessor did not do so, he took steps to obtain a lease for EMI of the New Premises, which were in relatively close proximity to the Original Premises (Judgment [333]). Without disclosing those steps, Mr Ibrahim then negotiated the Settlement Deed by which the lease of the Original Premises was reassigned to EMI. In the course of those negotiations, there was a debate as between the parties’ solicitors as to the scope of the release sought by Mr Ibrahim. Dr Kyatt ultimately agreed that EMIS would provide a wider release, which it is common ground extended to Mr Ibrahim’s conduct in issue in the proceedings. All of these matters are addressed, accurately and at length, by the Primary Judge in the Judgment.
Mr Chaudhry was removed as a director of EMIS on 22 February 2023.
The Settlement Deed was dated 23 February 2023. Recital H of the Settlement Deed recorded the position of the parties that:
“Mr Ibrahim is a director of MI No 2. Mr Ibrahim’s interest in [EMIS] is limited to his interest in the unit holdings of MI No 2 in Engadine Imaging Trust of which [EMIS] is the trustee.”
Irrespective of the terms of the release in the Settlement Deed, that recital recorded the scope of Mr Ibrahim’s role with EMIS in terms that are likely inconsistent with the claims made by the Appellants against Mr Ibrahim at first instance and on appeal.
“Upon entry into this Deed, [EMIS] and Dr Kyatt hereby release and discharge [EMI] and Mr Ibrahim, [EMI’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.”
The term “Dispute” was defined as “the disagreement between the Parties in relation to or in connection with the Lease and occupation of the Premises, and the Allegations”. The term “Allegations” was defined as allegations made by EMIS that Mr Ibrahim, inter alia, is a director or officer of EMIS. Unless set aside, that release defeats the allegations made by the Appellants on the basis that Mr Ibrahim was an officer of EMIS. I return to the Appellants’ claim to set aside the Settlement Deed, in whole or in part, at first instance and on appeal below.
By letter dated 17 March 2023, Mr Chaudhry resigned as a director of EMIS and from his position as manager and sonographer of EMIS; however, little turned on his resignation as a director on that date, where, as I noted above, he had previously been removed as a director of EMIS on 22 February 2023.
The Appellants draw attention to a somewhat artificial process, coordinated by Ms Coles, one of the staff at the radiology practices associated with Mr Ibrahim or Mr Chaudhry, by which employees of EMIS were encouraged to apply for corresponding jobs at EMI and then resigned from EMIS by letters of resignation in similar terms, before taking up positions with EMI. I recognise that this conduct could plainly be characterised as sharp practice (although of a kind that had previously been planned in respect of the Dapto practice, as I noted above) but those employees were not subject to restraints of trade and a third party may employ staff from a competitor, unless any relevant legal duty is breached by doing so.
The Appellants also refer to an email dated 23 March 2024 from Mr Ibrahim, copied to Mr Chaudhry, where Mr Ibrahim observed:
“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.”
This email indicates Mr Ibrahim’s involvement in the recruitment of these employees and Mr Chaudhury’s knowledge of that matter on this date, which is after he had been removed as a director of EMIS.
On 26 March 2023, five employees of EMIS at the Engadine practice resigned by email and four of them then commenced work with EMI in the Competing Business (Judgment [329], [331]).
EMIS’s Engadine practice was apparently closed by 29 March 2023 (Judgment [335]). On 30 March 2023, flyers were handed out outside the (closed) Engadine practice which falsely stated that the practice had relocated to the New Premises operated by EMI (Judgment [336]–[337]). Again, these matters involve sharp practice on the part of EMI and Mr Ibrahim.
Correspondence between the parties’ legal advisers followed, before these proceedings were commenced. By a letter dated 4 August 2022, solicitors acting for EMIS and Dr Kyatt recorded their contention that:
“Mr Ibrahim had, and continue to have, a fiduciary obligation to [EMIS] to act in the interests of joint venture partners in the business operating as Engadine Services (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 Premises, and not in his personal capacity as a director and shareholder of [EMI], in which there is a clear conflict.”
“We are instructed that there is no formal or informal joint venture between our client and your clients, which relate to the business conducted at the Premises. … Our clients’ involvement in the Business is limited to that of a shareholder of [EMIS].
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.”
“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.”
“The [P]laintiffs 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.
Mr Ibrahim was in control of [EMI] 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.
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.”
I pause to note that these findings do not support a claim that Mr Chaudhry (as distinct from Mr Ibrahim) was in control of the rebranding so far as EMI and the Competing Business were concerned and pointed to his involvement as being with the rebranding of the other practices with which he was involved.
“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.
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.
From July 2022 onwards, Dr Kyatt worked to recover the lease of the [Original] 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 [Original] Premises to Focus Radiology coming to a halt in some respects from August 2022 until around November 2022 when it was revived. …”
“Mr Ibrahim and Mr Chaudhry developed and implemented a scheme to rebrand Engadine Practice and then used that rebranding to establish Focus Radiology Engadine, knowing and intending that would “cripple” the Engadine Practice.”
The Primary Judge does not appear to have specifically addressed that submission although he addressed the rebranding at length. There are apparent difficulties with that submission. First, it appears to have the premise that the “scheme” involving the rebranding was directed to the position in respect of EMIS’s Engadine practice although the evidence before the Primary Judge showed that the rebranding was directed to several practices associated with Mr Chaudhry rather than specifically to the Engadine practice. Second, that submission does not identify how that rebranding had any necessary link with EMI’s establishing the Competing Business where that depended on EMI acquiring a lease to the New Premises and then recruiting staff from EMIS, neither of which required that the new business be branded under the “Focus Radiology” name. Third, it is also unclear how the rebranding had any effect on whether the establishment of a Competing Business would “cripple” EMIS’s Engadine practice which would presumably occur only if EMIS, with the benefit of the lease of the Original Premises and after seeking to retain its existing staff or recruit new staff, could not compete with the Competing Business.
The Appellants submitted that the rebranding was developed without Dr Kyatt’s consent or involvement and I noted above that it proceeded in respect of EMI’s new business at the New Premises rather than EMIS at the Original Premises.
Mr Condon, with whom Mr Collins appears for Mr Ibrahim and EMI, accepted in oral submissions on the appeal that a case as to rebranding was put below. Mr Sirtes, with whom Mr Di Lizia appeared for Mr Chaudhry, also recognised that the Appellants had relied on the rebranding at first instance as part of their complaint that EMI established the Competing Business under the Focus Radiology name. Mr Chaudhry also submitted that the rebranding may well have been advantageous to the other practices owned by Mr Chaudhry but it did not follow that the rebranding was contrary to the interests of EMIS. Mr Chaudhry also submitted that, although the Primary Judge dealt with the rebranding in the Judgment, his Honour did not reach any finding that the rebranding was a breach of duty by Mr Chaudhry; he was not asked to reach such a finding; and the Schedule of findings for which the Appellants contended on appeal does not seek any factual finding that that would support a conclusion that Mr Chaudhry breached his duties as a director of EMIS in respect of the rebranding; and the Appellants also do not contend, in the Schedule, that his Honour erred in not finding that the rebranding was an essential part of any scheme to “cripple the Engadine practice”, so far as that proposition was put below.
The Appellants also sought to attribute Ms Coles’ actions in respect for the rebranding of the Competing Business established by EMI to Mr Chaudhry. Mr Chaudhry responded that Ms Coles cannot be treated as a representative of Mr Chaudhry for all purposes, where the Primary Judge recognised (Judgment [128]) that Ms Coles was employed in one or more of the radiology practices owned by Messrs Ibrahim and/or Mr Chaudhry at different times and there is no challenge to that finding. There is force in that submission.
As I noted above, this appeal primarily raised challenges to the facts found by the Primary Judge. I will first refer address the first, fifth and sixth grounds of appeal, which allows a more logical order than dealing with the grounds of appeal in numerical order. By the first ground of the First Further Amended Notice of Appeal, the Appellants contended that the primary Judge erred in the approach taken to fact finding by failing to consider objectively determined facts, being contemporaneous communications and the logic of events and/or by failing properly to apply the rule in Jones v Dunkel informed by those matters, in respect of several contested factual findings. The Appellants here relied on a Schedule provided under Uniform Civil Procedure Rules 2005 (NSW) rr 51.18 and 51.36 (“Schedule”) which relevantly requires that the Appellants specify in the Notice of Appeal material facts that they contend that the Court below should, or should not, have found. There was a dispute as to the adequacy of the Appellants’ specification of those matters, which is a significant requirement in an appeal: South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69 at [135]; Best v Rosamond [2020] NSWCA 90 at [21]ff; Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167 at [53]ff. This issue had no real impact on the conduct of the appeal and it is not necessary to address it further.
The Appellants also advanced several criticisms of the Primary Judge’s approach to Dr Kyatt’s evidence, referring to the limitations on making credit assessments by reference to demeanour, which do not appear to have played any significant part in his Honour’s approach; the fallibility of recollection; and the risks of global findings as to credibility. The Appellants also submitted, uncontroversially, that findings of fact should be made on the basis of contemporary documents, by reference to objectively established facts and the apparent logic of events: ET-China.com International Holdings Ltd v Cheung (2021) 150 ACSR 461; [2021] NSWCA 24 at [212]; Gestmin SGPS SA v Credit Suisse UK Ltd [2013] EWHC 3560 (Comm) at [22]. There can be no suggestion that the Primary Judge did not take that approach, although the Appellants challenge the findings that he reached having done so. The Appellants also pointed to an appellate court’s obligation to undertake a real review of the trial and weigh conflicting evidence and draw its own inferences and conclusions as may be properly drawn from the evidence available on appeal, although recognising that we had not seen the cross-examination of the witnesses at first instance: Fox v Percy (2013) 214 CLR 118 at [25]; [2003] HCA 22; Bauer Media Pty Ltd v Wilson (No 2) (2018) 56 VR 674 at [264]ff; [2018] VSCA 154. I proceed on that basis.
This ground of appeal ultimately directs attention to the question whether the Primary Judge erred in the range of factual findings that are challenged by the Appellants. I address relevant findings in turn, which primarily arise in respect of the claims against each of Messrs Ibrahim and Chaudhry. It is not necessary to address the position in respect of EMI for the reason noted below in respect of the second ground of appeal. I address the questions of breach of duty raised in respect of Mr Ibrahim and Mr Chaudhry in dealing with the fifth and sixth grounds of appeal below.
“[E]ach of the three classes of persons described in para (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 of the definition all hold a named office in or in relation to the company; those identified in para (b) do not. Persons identified in the other paragraphs all hold offices for which the legislation prescribes certain duties and functions; those identified in para (b) do not. Persons identified in the other paragraphs of the definition are bound by the legislation to make certain decisions and do certain acts for or on behalf of the corporation; those identified in para (b) are identified by what they do (subpara (i)), what capacity they have (subpara (ii)) or what influence on the directors they have had and continue to have (subpara (iii)). There being these differences between para (b) of the definition and the other paragraphs (especially para (a)), it is not to be supposed that persons falling within para (b)(i) must be in substantially the same position as directors: those to whom the management and direction of the business of the company is usually … given.”
“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. … demonstrating that a person’s contribution to a decision can properly be described as a “real contribution” would not be sufficient to show that the person concerned had participated in making the decision. … Participation in any decision of a corporation does not make a person an “officer” — the decisions in which the person participates must have the significance for the business of the corporation that the statute prescribes.”
“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. … The question again is one of fact.”
“In Shafron, the plurality, in discussing para (b)(i) of the definition, said that “the inquiry required by this paragraph of the definition must be directed to what role the person in question plays in the corporation”. This observation applies equally to para (b)(ii) of the definition. The inquiry required by para (b)(i) and (ii) is concerned with whether the facts show that a putative officer has played a role in the corporation and the nature and extent of that role, not with some a priori classification of his or her position. …”
“The definition in s 9 is that of an “officer of a corporation”. The words “of a corporation” mean that, even where para (b) of the definition of “officer” is satisfied, it remains necessary to ask whether the “officer” is relevantly “of” the corporation. In the case of a person who is said to fall within para (b), questions of fact and degree arise as to whether that person also answers the description of being “of” the corporation in the sense of being engaged, in fact, in the management of its affairs or property.”
Their Honours also observed at [58] that “[t]he 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.”
“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).”
Their Honours then noted (at [91]) that:
“Similarly, 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.” [citations omitted]
The Primary Judge also referred (at [344]) to Nixon J’s review of relevant authorities, including Shafron and King, in Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79 at [495]ff. There was ultimately no contest on appeal as to the scope of these principles, or the correctness of his Honour’s statement of them, as distinct from a contest as to the facts to which they were to be applied.
His Honour then noted the matters pleaded in paragraph 17 of the FASOC as supporting the claim, in paragraph 18, that Mr Ibrahim was an officer of EMIS and Mr Ibrahim’s response in his Defence. His Honour addressed (Judgment [348]) nine matters on which the Appellants there relied to contend that Mr Ibrahim was an officer of EMIS. The Plaintiffs do not press the first three of those matters on appeal.
The Appellants pressed their reliance on Mr Ibrahim’s involvement in terminating an employee of EMIS and in a settlement with that employee, to which I referred in the chronology above. In closing submissions at first instance, the Appellants had submitted that Mr Ibrahim was involved in terminating the employee of EMIS and that he resolved the litigation commenced by that employee against EMIS but provided no reference to evidence that had been admitted at the hearing supporting that proposition.
The Primary Judge in turn held (Judgment [348(4)] that:
“In my opinion, the termination of an employee of EMIS is a significant matter. I have inferred that Mr Ibrahim investigated and established what had taken place before sending the notice of termination. I also found that there is no evidence that Mr Ibrahim consulted with either Dr Kyatt or Mr Chaudhry before undertaking the termination, although Mr Chaudhry probably knew about it. However, I do not think that this evidence of a single instance in 2021 of Mr Ibrahim acting to terminate an employee of EMIS brings Mr Ibrahim within any of the disjunctive parts of the [s 9 of the Act] as interpreted in Shafron. There is no evidentiary or principled basis on which I could make a finding that this one termination event demonstrates that Mr Ibrahim made or participated in the making of a decision which affects the whole or a substantial part of the business of EMIS, or that Mr Ibrahim had the capacity to affect significantly EMIS’ financial standing, or that Mr Ibrahim was a person in accordance with whose instructions or wishes the directors of EMIS were accustomed to act. In my assessment, none of those components of the definition of officer were proved by the plaintiffs by reference to this contended fact.”
“The [P]laintiffs contend that Mr Ibrahim resolved litigation commenced by a previous employee of EMIS against EMIS. They rely on the terms of settlement between Jong Min Son and EMIS, which was signed by Jong Min Son on 25 June 2021.
Mr Ibrahim responds that the terms of settlement, in the form admitted into evidence, are not signed by anyone on behalf of EMIS, nor is there any reference to Mr Ibrahim in them.
I accept Mr Ibrahim’s submissions. The terms of settlement do not disclose any involvement by Mr Ibrahim, for instance in negotiating or agreeing to them, and cannot form any basis for the finding of fact sought.”
The Appellants pointed to events relating to Mr Ibrahim’s suggested involvement in negotiating or agreeing the terms of the settlement with this employee. Mr Ibrahim and EMI responded that there was no evidence that the terms of settlement with the relevant employee were agreed or signed on behalf of EMIS, by Mr Ibrahim or anyone else, and that Dr Kyatt gave no evidence that the matter was resolved on that basis. They submitted that there was no need for Mr Ibrahim to lead evidence as to that matter, where there was no evidence which called for any response on his part.
I can see no error in his Honour’s reasoning by reference to the facts that he found or the matters raised on appeal. His Honour recognised the significance of the termination of the employee; while he did not expressly note the reference to Mr Ibrahim in the settlement agreement with that employee; he was correct in observing that the Appellants had identified no evidence for this proposition at first instance; and I have addressed the Appellants’ approach in the appeal above. It seems to me that his Honour was also correct in recognising that the fact that the termination of the employee was a “single instance”; there was no other evidence of Mr Ibrahim’s involvement in employment matters; the lapse of time between 2021 and the later steps taken by Mr Ibrahim in obtaining the lease for EMI; and the absence of evidence of Mr Ibrahim’s involvement in the settlement agreement with that employee (if it was executed by EMIS) had the consequence that he could not find, by reference to these matters, that Mr Ibrahim was an “officer” of EMIS at any relevant time.
The Appellants challenged the Primary Judge’s factual findings (Judgment [348(9)]) as to Mr Ibrahim’s conduct in relation to the Original Lease between August 2021 and February 2022. His Honour there found that:
“The [P]laintiffs contend that the conduct between August 2021 and February 2022 in relation to the [Original] Lease, a significant asset of EMIS, with the knowledge and approval of Mr Chaudhry, entailed the holding out of Mr Ibrahim as a person entitled to make significant decisions on behalf of EMIS.
I reject this submission. While the evidence shows that on 18 August 2021 at 12:01pm, Mr Ibrahim emailed Mr Chaudhry with a draft response to Ms Milsted of All Star Property Group regarding the proposed renewal of the [Original] Lease, that was the only active involvement of Mr Ibrahim in that process. Such an isolated event more than one year in advance of the relevant period for the consideration of Mr Ibrahim as an officer of EMIS does not provide any sound evidentiary basis for making that finding in accordance with the elements of [s 9 of the Act].”
“The objective evidence … demonstrates that Mr Ibrahim was a person who, in fact, made the significant decision that affected the whole, or substantial part, of the business owned by EMIS and was a person with whose instructions the directions of EMIS were accustomed to act.”
Mr Ibrahim and EMI responded by supporting the Primary Judge’s finding (Judgment [348(9)]) that this was an isolated act which did not have the result that Mr Ibrahim was an officer of EMIS.
As I also noted above, on 25 November 2021, Mr Chaudhry subsequently sent an instruction to Mr Inayat seeking to bring about a renewal of the lease for a shorter term than initially proposed by Mr Ibrahim.
This matter is also not sufficient to allow the finding, for which the Appellants contend, that Mr Chaudhry acted in accordance with instructions from Mr Ibrahim as to these matters. A director who accepts a suggestion from another person does not necessarily act under instruction and the fact that Mr Chaudhry’s later proposal for renewal of the lease differed from Mr Ibrahim’s earlier suggestion undermines any inference that he was acting under instruction from Mr Ibrahim in that regard. As the Primary Judge recognised, this conduct also related to a single, although significant, matter in August 2021, a significant time before EMI acquired the lease over the Original Premises and later established the Competing Business. Mr Ibrahim was also not held out to any third party as having authority to make decisions on behalf of EMIS, where he exchanged emails with Mr Chaudhry rather than a third party.
The Appellants also challenged the Primary Judge’s factual findings (Judgment [348(8)]) as to whether Mr Ibrahim was involved in decision making with respect to when to take profit out of EMIS. The Appellants contended (Schedule [1.1]–[1.2]) that the Primary Judge erred (Judgment [91]) in finding that there was no evidence of what, if any, action was taken in response to a request by Mr Ibrahim to take out $300,000 from EMIS; and also in failing to find the sum of $300,000 was taken out from EMIS at the request of Mr Ibrahim. In an overlapping contention, the Appellants also contended (Schedule [4.1]–[4.2]) that the Primary Judge erred (Judgment [348(8)]) in finding that Mr Ibrahim was not involved in decision-making with respect to when to take profits out of EMIS; and in failing to find that Mr Ibrahim was involved in decision-making with respect to when to take profits out of EMIS.
The Primary Judge relevantly found (Judgment [90]–[91]) that:
“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.”
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.”
The Primary Judge also found (as recorded in the second sentence in Judgment [90]) that how the income of the trust was to be distributed was the decision of Advanced Imaging, a company controlled by Dr Kyatt, under cl 10.3(a) of the Trust Deed and not something over which Mr Ibraham had any control. That finding is not challenged.
The Primary Judge also relevantly observed that (Judgment [348(8)]:
“The [P]laintiffs contend that there is objective evidence that Mr Ibrahim was involved in decision making with respect to when to take profits out of EMIS. They rely on the email dated 28 January 2021 which Mr Ibrahim sent to Dr Kyatt and Mr Chaudhry, copied to Mr Inayat, expressing his belief that they should begin to distribute shareholders’ funds weekly, proposing that they take out $300,000 that week then distribute $3,000 every Friday divided according to each shareholder’s portion and asking them to let him know their thoughts.
Mr Ibrahim responds that this email constitutes a request and in accordance with cl 10.3(a) of the Engadine Trust Deed, which governs the distribution of income, that matter was entirely in the decision of Advanced Imaging.
I agree with Mr Ibrahim. The email cannot form the basis for any finding that Mr Ibrahim was involved in decision making with respect to when to take profits out of EMIS. The email does not demonstrate an involvement in decision making about that issue and the decision was one for Dr Kyatt under the Engadine Trust Deed through his control of Advanced Imaging.”
The Appellants pointed in submissions to Mr Ibrahim’s request for a distribution from EMIS on 28 January 2021. Mr Ibrahim and EMI responded that Mr Ibrahim’s request for a distribution of profits on 28 January 2021 did not support a finding that he was an officer of EMIS, for the reasons given by the Primary Judge (Judgment [348(8)]). I can see no error in the Primary Judge’s findings (challenged in Schedule [1.1]–[1.2]) as to the $300,000 distribution from the trust on 28 January 2021. The fact that a shareholder or unitholder’s request for a distribution from a company or trust is accommodated by the controllers of that company or trust does not, without more, indicate that that shareholder or unitholder control or is an officer of the company.
In support of their wider contention (Schedule [4.1]–[4.2]) as to Mr Ibrahim’s involvement in decisions to take profits from EMIS, the Appellants relied on the payment of consulting fees to Dr Kyatt, Mr Ibrahim and Mr Chaudhry. Mr Ibrahim and EMI responded that the payment of those fees to Mr Ibrahim did not support a finding that he was an officer of EMIS where there is no evidence of his involvement in the decision to pay them. That submission seems to me to be correct. For completeness, the fact that the payments were characterised as “consulting fees” does not support an inference that any work that Mr Ibrahim did involved making decisions that affected the whole or a substantial part of EMIS’s business or otherwise made him an officer of EMIS. The Appellants also relied on an occasion which Mr Ibrahim withdrew a distribution amount from EMIS’s bank account, allegedly without consulting Dr Kyatt, in December 2021. Mr Ibrahim and EMIS responded that the claim that Mr Ibrahim withdrew an amount from EMIS’s bank account without consulting Dr Kyatt was not part of the case put by the Appellants at first instance (a matter which we need not decide) and that the emails to which the Appellants refer do not indicate that Mr Ibrahim, rather than Mr Chaudhry who then had the day-to-day management of EMIS, effected the transfer of that amount from EMIS’s bank account. I accept the latter submission and the factual basis of this contention was not established.
The Appellants also relied on Mr Ibrahim’s access to financial information concerning EMIS. The Primary Judge observed (Judgment [350]–[351]) that:
“Having access to financial documents of the Engadine Imaging Trust in his capacity as a director of one of the unit holders in that trust does not satisfy any of the disjunctive parts of the definition of officer in s 9AD of the Corporations Act.
I also agree with the closing submissions made by Mr Ibrahim that in the case made by the plaintiffs that Mr Ibrahim was an officer of EMIS they have simply failed to deal with the operation of the provisions of the Engadine Trust Deed that make the control and management of the Engadine Practice the responsibility of the majority unit holder, Advanced Imaging. This is particularly the case in relation to cl 17.5(a), which states that while ever Advanced Imaging is a unit holder, it has the right to nominate a representative who has total control of the day-to-day management of the business and make all decisions of a management, administrative and strategic nature in regard to the business of the Engadine Practice, without any money restrictions. There is no pleading to the effect that Advanced Imaging gave any authority to anyone to make decisions or so act in circumstances where it had “complete control” of the Engadine Practice.”
The Appellants drew attention to the fact that Mr Ibrahim was permitted wider access to EMIS’s accounting system, Xero, in March 2020, than was arguably his entitlement under the terms of the Engadine Unit Trust and contended that that access permitted him the ability to make informed decisions about EMIS. Mr Ibrahim and EMI responded that Mr Ibrahim’s access to accounts in electronic form on Xero were consistent with the entitlements of a unitholder under cl 13.2 of the Trust Deed and, in any event, did not provide any ability to make decisions of or for EMIS. I accept that access to information to allow a unitholder to make informed decision does not, alone or with the other matters to which the Appellants refer in respect of Mr Inrahim, make him an officer of EMIS.
The Appellants then contend, in a wider challenge to the Primary Judge’s findings (Schedule [6.1]–[6.2]), that the Primary Judge erred in finding (Judgment [352]) that Mr Ibrahim was not an officer of EMIS and in failing to find that Mr Ibrahim was an officer of EMIS. His Honour relevantly found that:
“Accordingly, I find that the allegation that Mr Ibrahim was an officer of EMIS at any relevant time is not established. As a result, it is not necessary for me to deal with the claim that Mr Ibrahim had breached any obligations owed to EMIS as an officer of EMIS and no relief can be obtained against Mr Ibrahim in relation to that claim.”
This conclusion was reached following the factual findings reached by the Primary Judge to which I referred above.
The Appellants pointed out, and I recognise, that the conduct on which they rely occurred after Dr Kyatt moved to Jordan in October 2019, and that Mr Ibrahim could have but did not give evidence as to that conduct at first instance. The Appellants also relied on matters relating to the rebranding of the EMIS business which I addressed above.
Mr Ibrahim and EMI in turn drew attention to the Primary Judge’s unchallenged finding (Judgment [72]) that, after Dr Kyatt had returned to Jordan, Mr Chaudhry took over management of EMIS’s Engadine practice and assumed “primary responsibility” for its day-to-day operations. Mr Ibrahim and EMI also submitted that it was not sufficient for the Appellants to point to discrete acts of Mr Ibrahim in order to establish that he was an officer of EMIS at the relevant time. They submitted that the Appellants do not challenge the Primary Judge’s findings that Dr Kyatt and then Mr Chaudhry had managed EMIS’s business. I recognise that the fact that Dr Kyatt or Mr Chaudhry controlled the day-to-day management of EMIS does not necessarily exclude a proposition that Mr Ibrahim also satisfied one or more of the criteria necessary to have been an “officer” of EMIS. Mr Ibrahim and EMI also pointed to the gap in time between the acts on which the Appellants rely and the time at which EMI established the Competing Business.
Mr Ibrahim and EMI also submitted that conduct of Mr Ibrahim, on behalf of EMI rather than EMIS, would not establish that Mr Ibrahim was an officer of EMIS. They emphasised that Mr Ibrahim was not acting in the business of EMIS, or for EMIS, at least from 12 July 2022 when EMI had issued the notice, signed by Mr Ibrahim, requiring EMIS to vacate the original Premises and, as the Primary Judge had held, Dr Kyatt had recognised that Mr Ibrahim was seeking to take EMIS’s business and run the Competing Business (Judgment [146], [239], [241], [247], [292]). They also submitted, with substantial force, that Dr Kyatt did not then permit Mr Ibrahim to be involved in decision-making for EMIS from July 2022 onwards, when Mr Ibrahim was plainly then acting contrary to EMIS’s interests, and the Appellants do not contend that Mr Ibrahim was, in fact, involved in such decision-making or exercising other control of EMIS either at the time the Settlement Deed was executed or when EMI acquired a lease to the Original Premises and subsequently opened the Competing Business.
Turning now to the rebranding, the Appellants submitted that Mr Ibrahim was a person on whose instructions the directors of EMIS were accustomed to act with respect to the rebranding of the Engadine practice and they relied on Judgment [278] in support of that proposition. The Primary Judge’s findings in that paragraph were only that, relevantly, 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 Mr Chaudhry’s knowledge. The Primary Judge held that those matters did not support a finding that Mr Chaudhry acted in accordance with Mr Ibrahim’s “instructions” in that regard, as distinct from consulting with him, still less that he did so in respect of the business of EMIS.
“Mr Ibrahim is a director of MI No 2. Mr Ibrahim’s interest in [EMIS] is limited to his interest in the unit holdings of MI No 2 in Engadine Imaging Trust of which [EMIS] is the trustee.”
That recital is likely adverse to the Appellants’ claim that Mr Ibrahim was an officer of EMIS so far it records an agreed position that Mr Ibrahim’s only interest in EMIS is as unitholder in respect in the trust. I recognise that, by their misleading or deceptive conduct claim, which I address below, the Appellants seek to set aside the Deed of Settlement as a whole or in respect of specific provisions. However, the proposition that the releases in the Settlement Deed were induced by misleading or deceptive conduct, even if was established, would not give rise to any apparent basis to treat a recital of fact in the Settlement Deed, to which the parties had committed themselves, as false. The appeal against his Honour’s finding that it was not established that Mr Ibrahim was an officer of EMIS must fail for these reasons.
It is convenient now to address the fifth and sixth grounds of appeal and to do so together, since they overlap. The parties were allowed an opportunity for brief further submissions in response to these amendments which I address below. By the fifth ground of appeal, added by the First Further Amended Notice of Appeal by leave on 24 November 2025, the Appellants contended that the Primary Judge erred in dismissing two allegations of breach of duty against Mr Ibrahim. They contended that:
“The Primary Judge erred by failing to find that [Mr Ibrahim] breached the fiduciary and statutory duties owed to [EMIS] as pleaded at paragraphs 21.2 and 21.3 of the [FASOC] by:
5.1 acting in the manner pleaded in paragraph 25.8 of the FASOC; and/or
5.2 acting in the manner pleaded in paragraph 25.12 of the FASOC, to the extent such actions establish the Competing Business.”
By the sixth ground of appeal, also added by the First Further Amended Notice of Appeal, the Appellants contended that the Primary Judge erred in dismissing the same two allegations of breach of duty against Mr Chaudhry.
Dealing first with the position in respect of Mr Ibrahim, by FASOC [21.2]–[21.3], the Appellants had pleaded that, by reason of specified circumstances, Mr Ibrahim owed specified fiduciary duties and equitable duties to, relevantly, EMIS and statutory duties as an officer of EMIS. The relevant circumstances appear to be that Mr Ibrahim had specified duties and responsibilities in respect of the Engadine practice (FASOC [17]), he was an officer of EMIS within the meaning of s 9 of the Act (FASOC [18]; and he had access to confidential information (FASOC [19]–[20]). The Primary Judge did not accept these contentions or their factual basis. No challenge is brought to several of his findings and the challenge brought to the balance of those findings has failed for the reasons noted above. This ground of appeal must fail in respect of Mr Ibrahim, because the relevant duties were not established.
It is therefore not strictly necessary to address the other aspects of this ground of appeal in respect of Mr Ibrahim, although I will do so for completeness. The first aspect of this ground is that, if the pleaded duties existed, the Primary Judge erred by failing to find that Mr Ibrahim breached them by acting in the manner pleaded in FASOC [25.8] which alleged that he induced or attempted to induce employees or contractors of EMIS, presumably to join EMI, or assisted Mr Chaudhry to do so.
Mr Ibrahim and EMI made brief further submissions as to the question whether there was evidence that Mr Ibrahim had induced or attempted to induce employees of EMIS to work in the Competing Business. They submitted that the claim that Ms Coles’ conduct in respect of employees was undertaken at Mr Ibrahim’s direction was inconsistent with the Appellants’ claim, in other contexts, that Ms Coles’ conduct was undertaken at Mr Chaudhry’s direction. There is no necessary inconsistency in those submissions, if (as the Primary Judge found) Ms Coles sometimes worked for Mr Ibrahim and sometimes for Mr Chaudhry or if, as the Appellants contend, Mr Ibrahim and Mr Chaudhry were acting together. However, I also bear in mind the Primary Judge’s finding that Ms Coles was acting for Mr Ibrahim in respect of the rebranding of the Competing Business, which I have addressed above.
It was not necessary for the Primary Judge to determine the claim that Mr Ibrahim had induced or attempted to induce employees of EMIS to work in the Competing Business, given the findings he had reached. I accept this breach would likely have been established, by an inference that Ms Coles was acting on EMI’s and Mr Ibrahim’s behalf in dealing with the recruitment of EMIS’s staff, had Mr Ibrahim been an officer of EMIS, but that has not been established. This aspect of the appeal must also fail.
“Establishing the Competing Business … for its benefit to the exclusion of EMIS and other than for the benefit of EMIS, or alternatively assisted [Mr Chaudhry] to do this.”
Mr Ibrahim and EMI also addressed the question of Mr Ibrahim’s conduct in establishing the Competing Business. They rightly observed that the question whether a director or officer’s involvement in a competing business constitutes a breach of duty depends on the particular circumstances: Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580; [2016] NSWCA 347 at [133]ff. They also submitted that, even if Mr Ibrahim owed fiduciary or statutory duties to EMIS as an officer, they would not have been breached by EMI’s competition with EMIS. In response, the Appellants accept that holding a directorship or being an officer of a competing company does not of itself constitute a breach of fiduciary duty but submit that Mr Ibrahim did more than simply hold an office in EMI.
This submission also does not assist the Appellants, where any breach of duty still depended upon the Appellants establishing that Mr Ibrahim was an officer of EMIS at the relevant time. For completeness, this ground of appeal must also fail in respect of Mr Ibrahim because this claim was released by the Settlement Deed, the application to set that Deed aside failed at first instance and the appeal as to that issue also fails for the reasons noted below.
Turning now to the sixth ground of appeal in respect of Mr Chaudhry, he was, until 22 February 2023, a director of EMIS and plainly owed fiduciary, equitable and statutory duties to EMIS arising from that position. Several of the factual findings challenged in the Schedule relate to the claim for breach of duty against Mr Chaudhry. In dealing with that claim, the Primary Judge noted (Judgment [394]–[401]) the scope of the pleaded claim for breach of statutory and fiduciary duties against him and noted the pleaded breaches of duty, many of which are not pressed on appeal. His Honour identified (Judgment [402]–[408]) the applicable statutory provisions and reviewed case law considering their content, including Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789. The content of the duties and the applicable law were not in contest on the appeal.
The first aspect of this ground of appeal is that the Primary Judge erred by failing to find that Mr Chaudhry breached his duties as a director of EMIS by acting in the manner pleaded in FASOC [25.8] which alleged that he induced or attempted to induce employees or contractors of EMIS, presumably to join EMI, or assisted Mr Ibrahim to do so. The Appellants also challenged (Schedule [12.1]–[12.2]) the Primary Judge’s finding (Judgment [416]) that:
“In relation to the allegation that Mr Chaudhry induced or attempted to induce employees or contractors of EMIS, presumably to leave EMIS and join [EMI], or assisted Mr Ibrahim to do this, the only evidence of steps being taken to have employees of EMIS leave and join [EMI] involving Mr Chaudhry is in March 2023, by which time Mr Chaudhry was no longer a director of EMIS and did not owe any duties to EMIS. Once Mr Chaudhry was removed as a director of EMIS on 22 February 2023, he no longer owed any duties to EMIS. Accordingly, any involvement Mr Chaudhry had in the staff at the Engadine Practice resigning and accepting offers of employment at Focus Radiology Engadine is not something which is actionable by EMIS.”
Mr Chaudhry submitted that the Appellants had not identified in the Schedule, or in submissions, the steps which Mr Chaudhry was alleged to have taken, prior to his removal as a director of EMIS on February 2023, amounting to any inducement or attempted inducement of employees or contractors of EMIS or any assistance in Mr Ibrahim doing so and that there was no evidence before the Primary Judge of any such inducement at the relevant time. That submission depends upon the proposition that Ms Coles’ conduct in respect of the Competing Business cannot, on the evidence at the trial, be attributed to Mr Chaudhry. Mr Chaudhry also pointed to the Primary Judge’s finding (Judgment [416]) that the only evidence of relevant conduct by Mr Chaudhry related to the period from March 2023, after he was no longer a director of EMIS and did not owe any duties to EMIS.
The Appellants responded that:
“The activities of Mr Ibrahim and Mr Chaud[h]ry acting in concert directly and indirectly using Ms Coles amounted to the inducement of employees or contractors of EMIS and the establishment of EMI to the exclusion of EMIS and to the benefit of Messrs Ibrahim and Chaud[h]ry.”
The difficulty with this proposition, as with the similar case put before the Primary Judge, is that it depends on several propositions which were not established, namely that Mr Ibrahim and Mr Chaudhry were acting in concert in respect of these matters; that they were together “using Ms Coles” to do so; and that that conduct took place at a time that either of them owed relevant duties to EMIS. The remaining proposition, that the establishment of EMI was to Mr Ibrahim’s benefit and implicitly to EMIS’s disadvantage, is uncontroversial but does not establish a breach of duty by Mr Chaudhury. The Appellants also rely on the Crowd IT proposal, which I address below.
It seems to me that the Primary Judge’s finding as to this matter was correct and that his Honour was also correct in holding that no breach arose from this matter. The Appellants did not challenge the finding that Mr Chaudhry was removed as a director of EMIS on 22 February 2023. Although they contended that Mr Chaudhry had acted in breach of duty prior to that date, there was no evidence to support that contention in respect of any dealing with EMIS’s employees, and I accept Mr Chaudhry’s submission that Ms Coles’ conduct in respect of the recruitment of employees for EMI cannot be attributed to Mr Chaudhry, as distinct from Mr Ibrahim, for the reasons noted above. So far as Mr Chaudhry’s conduct after his removal as a director of EMIS is concerned, fiduciary obligations generally do not continue beyond the termination of the fiduciary relationship: Attorney-General v Blake [1998] Ch 439 at 453–5; [1998] 1 All ER 833; Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 235; [1999] 1 All ER 517; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 at [83]. An exception to that proposition may arise where a director resigns in order to perfect a breach of duty which he or she has earlier commenced: Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1; [2003] SASC 318. However, I can see no reason to extend that exception to the position where a director or fiduciary ceases to hold office because he or she is removed from that office, as occurred here.
The second aspect of this ground of appeal is that the Primary Judge erred by failing to find that Mr Chaudhry breached his duties as a director of EMIS by acting in the manner pleaded in FASOC [25.12], by, broadly, establishing the Competing Business. The Appellants also contended (Schedule [2.1]–[2.2]) that the Primary Judge erred in finding (Judgment [144], [415]) that Mr Chaudhry was not directly or actively involved in EMI obtaining the lease of the New Premises and in failing to find that Mr Chaudhry was directly or actively involved in obtaining the lease of those premises; and (Schedule [11.1]–[11.2]) that the Primary Judge erred in finding (Judgment [414]) that Mr Chaudhry was not involved in the operations or management of EMI, acquiring the lease for EMI, or alternatively in not finding that he was involved in acquiring that lease.
His Honour relevantly held (Judgment [144]) that:
“… The available inference I draw is that Mr Chaudhry knew that Mr Ibrahim was taking steps to obtain the New Lease in the name of Engadine Medical Imaging because the Focus Radiology rebranding process was being coordinated by Mr Chaudhry and included the Engadine Practice located at the Engadine Premises. However, there is no conclusive evidence that Mr Chaudhry was directly or actively involved in obtaining the New Lease and I cannot use a Jones v Dunkel inference to fill gaps in the evidence.
“There is no evidence that Mr Chaudhry had any involvement:
(1) in the operations or management of [EMI], of which Mr Ibrahim was sole director, secretary and shareholder;
(2) in the steps taken in July 2022 by Mr Ibrahim to obtain the New Lease of the [New] Premises in the name of [EMI];
(3) in the steps taken across September, October and November 2022 by Mr Ibrahim to obtain the Focus Engadine Lease of the [New] Premises; and
(4) in or had any knowledge of Mr Ibrahim’s negotiations of the draft Deed which ultimately resulted in the execution of the Deed of Settlement and the Deed of Assignment.”
In relation to the allegation that Mr Chaudhry failed to exercise the option under the Lease on behalf of EMIS and permitted the Lease to expire in order for [EMI] to then obtain the New Lease to the exclusion of EMIS, or alternatively assisted Mr Ibrahim to do this, there is evidence that Mr Chaudhry did act to renew the Lease. Firstly, Mr Chaudhry sent an email on 18 August 2021 to All Star Property Group expressing a desire to renew the Lease. Secondly, he sent an email on 25 November 2021 to Mr Inayat asking him if he had sent an email to renew the Lease, following which, on Mr Chaudhry’s instructions, Mr Inayat emailed All Star Property Group expressing a desire to renew the Lease. Thirdly, I have inferred that at that time, Mr Chaudhry would have believed that the Lease would be renewed, having requested Mr Inayat to inform the agent of that request and having seen that Mr Inayat had done as he instructed. As I have said above, there is no evidence that Mr Chaudhry was involved in the steps taken in July 2022 by Mr Ibrahim to obtain the New Lease of the Engadine Premises in the name of [EMI]. In my opinion, the [P]laintiffs have failed to demonstrate that Mr Chaudhry breached his duties owed to EMIS as a director of EMIS in relation to the failure to renew the Lease and the granting of the New Lease to [EMI].”
“In relation to the allegation that Mr Chaudhry established the Competing Business … for its benefit to the exclusion of EMIS and other than for the benefit of EMIS, or alternatively assisted Mr Ibrahim to do this, there is no evidence that Mr Chaudhry had any involvement in establishing the Focus Engadine Practice which was established by Mr Ibrahim as the sole director, secretary and shareholder of [EMI]. ...”
That observation was correct, at least in the sense that the Appellants had not identified any evidence for that proposition in their submissions at first instance and the matters to which I refer below do not falsify it.
The Appellants pointed to several matters to establish Mr Chaudhry’s “involvement” in EMI’s establishing the Competing Business at the New Premises. The first matter relied on was that Mr Chaudhry knew that Mr Ibrahim was taking steps to set up a competing business from July 2012 (Judgment [278], [412]). The second matter was that Crowd IT issued an information technology proposal to Mr Chaudhry on 18 February 2023, which referred to the provision of information technology services to several other businesses associated with Mr Chaudhry that would trade under the “Focus Radiology” name and also to the business to be conducted by EMI at the New Premises (Judgment [276(8)]); the third matter was that Mr Chaudhry signed that document on 26 February 2023 (Judgment [276(10)]); the fourth matter was a claim that the receipt of that document and signing it was an “active step taken by Mr Chaudhry to assist Mr Ibrahim establish the Competing Business”.
The Appellants placed particular weight upon Mr Chaudhry’s receipt of the proposal from Crowd IT, and submitted that there would be no reason to issue this document in the name of Mr Chaudhry unless he was assisting Mr Ibrahim to establish the Competing Business. The Appellants also submitted that Mr Chaudhry was not aware, at the time he signed that document, that he had been removed as a director of EMIS on 22 February 2023, and was continuing to attend to responsibilities as a manager of the business at that time. Mr Chaudhry’s knowledge of his removal as a director of EMIS was not here to the point, where his obligations as a director ceased when he ceased to be a director of EMIS.
Mr Chaudhry responded that the rebranding proposal was directed to several practices which would trade under the name Focus Radiology and that his involvement in that proposal could readily be explained by his involvement with those practices rather than the new Engadine practice to be established by EMI. I recognise that Mr Chaudhry did not give evidence at first instance to advance that explanation. Mr Chaudhry also submitted that the receipt of that document by Mr Chaudhry did not establish that Mr Chaudhry, rather than other staff, had taken any earlier steps to have Crown IT prepare and submit that document. Mr Chaudhry also submitted that the receipt of the Crowd IT proposal was not a breach of Mr Chaudhry’s statutory or fiduciary duties as a director of EMIS, where mere receipt of that proposal could not have placed Mr Chaudhry in a position of conflict or given rise to any undisclosed profit on his part or any breach of his statutory duties.
In further submissions as to this ground of appeal, Mr Chaudhry also submitted that, on appeal, the Appellants seek to narrow their claims at first instance in respect of the Competing Business and contends that the Primary Judge was not required to reach findings as to a narrower claim than had been put at first instance. There is force in that proposition but, in any event, as Mr Chaudhry pointed out, the claim that is now put depends upon Mr Chaudhry’s receipt of the Crowd IT proposal and the attribution of Ms Coles’ conduct in respect of EMI to Mr Chaudhry and those matters were not established at first instance or on appeal for the reasons noted above. In response, the Appellants emphasised that Mr Chaudhry did not give evidence at first instance and that their case was based on documents and inferences that could be drawn from them. The Appellants otherwise repeat the submission that Ms Coles was acting under the direction of Mr Chaudhry in respect to the rebranding but this does not advance this ground of appeal for the reasons noted above.
By their third ground of appeal, the Appellants contended that the Primary Judge erred in dismissing their claims against the Respondents, Mr Ibrahim, EMI and Mr Chaudhry. The Appellants treated this ground of appeal as directed to factual findings as to the extent of Mr Chaudhry’s involvement in relevant matters and consequential on grounds 1 and 2 of the appeal, and this ground of appeal cannot succeed where those grounds of appeal have not succeeded. The Appellants also sought a range of other relief on appeal, including allowing the appeal, setting aside the orders made by the Primary Judge on 6 November 2024, and making a range of the orders sought at first instance. Those orders could not be made as against Mr Ibrahim or Mr Chaudhry where the appeal has not otherwise been successful.
For completeness, no relief is available on appeal against EMI where that relief was not pressed at first instance. In closing submissions at first instance, the Appellants accepted that:
“The remedies against EMI do not require attention because if the claim against Mr Ibrahim fails, no relief could be obtained against EMI, but if the claim against Mr Ibrahim succeeds relief against EMI would be otiose”.
The Primary Judge recognised the Plaintiffs’ submission in respect of the relief sought against EMI (Judgment [7]) and dismissed the proceedings against it on that basis. That position could not now be reopened on appeal.
“(a) failing to consider all relevant circumstances when considering and determining the factual question of reliance;
(b) characterising clause 13.2 of the [Settlement Deed] (which on the Appellants’ case was unenforceable) as a “solemn disclaimer of reliance by the Appellants, thereby placing significant weight on it”; and
(c) Misapplied the no exclusion principle by failing to find that clause 13.2 of the [Settlement Deed], or any part of the [Settlement Deed] could not be relied on in any way whatsoever as a bar to the claim for misleading or deceptive conduct.”
The Appellants submitted that this ground of appeal raised a question of law and they contended that the Primary Judge ought not to have considered the terms of the Deed of Settlement when considering the factual question of reliance. The Appellants accepted that if the Primary Judge’s finding that Mr Ibrahim was not an officer of EMIS was not overturned (as it has not been), then any question as to the Settlement Deed did not arise because there would be no relevant liability of Mr Ibrahim to release. I will nonetheless briefly address this matter.
The Primary Judge noted (Judgment [353]) that it was not necessary for him to address this claim because the claim that Mr Ibrahim was an officer of EMI, so as to have breached obligations arising from that capacity, had failed. His Honour nonetheless summarised the Appellants’ pleaded case below (Judgment [354]) and noted the Appellants’ contention at first instance that Mr Ibrahim had made, inter alia, representations, relevantly to include entry into the Deed of Settlement that:
“(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.”
The term “Competing Business" was relevantly defined in FASOC [5.4] to be a radiology practice subsequently trading as Focus Radiology Engadine situated at other premises.
The Primary Judge then accurately summarised (Judgment [357]ff) the applicable statutory provisions and the case law, referring, inter alia, to Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 475, approved in Wormald v Maradaca Pty Ltd [2020] NSWCA 289 at [111]ff, Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [16]ff and to observations of Payne JA (with whom Bell CJ and White JA agreed) in Lin v Zheng [2023] NSWCA 174 at [31]–[36].
The Primary Judge then addressed (Judgment [374]ff) the several representations on which the Appellants claimed to have relied but the Appellants contend for different factual findings in respect of only some of those representations. His Honour referred to the alleged representations made during a “Negotiation Period” over an extended period, between July 2022 and 23 February 2023, when Dr Kyatt, Mr Chaudhry and Mr Ibrahim entered into negotiations to have the lease obtained by EMI over the Original Property assigned by it to EMIS. His Honour observed (Judgment [374(5)]) in respect of the third, fourth and fifth alleged representations, as to which his findings are challenged, that:
“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.”
“I also wish to address in general terms the matters that Dr Kyatt alleges Mr Ibrahim failed to disclose to him or remained silent about during the negotiation of the Deed of Settlement. Applying the principles set out in Miller and Wormald, I consider that it was not misleading or deceptive for Mr Ibrahim to stay silent about the detail of the plans he had for establishing a new radiology practice in Engadine in competition with the Engadine Practice. As I have found, Mr Ibrahim was not a director or an officer of EMIS. He did not owe any fiduciary or other duties to Dr Kyatt. Mr Ibrahim and Dr Kyatt were in a competitive position of equal bargaining power and were equally well resourced and advised by their respective lawyers. The circumstances were not such as to give rise to any reasonable expectation that Mr Ibrahim would reveal the plans that he had to Dr Kyatt. Mr Ibrahim was free to act in his own best interests, as was Dr Kyatt. Dr Kyatt had demonstrated that he was not a stranger to acting in his own best interests by effectively abandoning the Engadine Practice in October 2019 to move with his family to Jordan and then refusing to do any remote work for the Engadine Practice, instead choosing to do work for IDXT (from October 2019) and I-MED (from April 2021) for which he evidently was paid more money.
As a result, I do not consider that any silence by Mr Ibrahim concerning his involvement in the establishment of Focus Radiology Engadine was actionable by the plaintiffs as an instance of misleading or deceptive conduct.”
The parties addressed the question whether a non-disclosure of EMI’s plans to open the Competing Business was misleading or deceptive or likely to mislead or deceive in the context of the negotiations in respect of the Settlement Deed. The Appellants rightly recognised that the Primary Judge’s finding that Mr Ibrahim was not an officer of EMIS was significant to his finding that Mr Ibrahim’s non-disclosure of his plan to establish a Competing Business (the risk of which, as the Primary Judge found, had plainly been recognised by Dr Kyatt) was not misleading or deceptive conduct. On appeal, the Appellants appear to have accepted that, unless it was found that Mr Ibrahim was an officer of EMIS, there would be no expectation of disclosure of those matters in arm’s length negotiations to the Settlement Deed. There was greater dispute as to whether, if Mr Ibrahim were an officer of EMIS, an expectation of disclosure would have arisen, and Mr Ibrahim did not concede that matter. It is not necessary to resolve that question.
The Appellants submitted that:
“In the event, if Mr Ibrahim is found to be an officer of EMIS on and from October 2019, he would be subject to the pleaded statutory duties imposed on officers by ss 180-183 of the [Act] … Such a duty would create a reasonable expectation that Mr Ibrahim would disclose his involvement to Dr Kyatt, even in circumstances where each were in a competitive position of equal bargaining power and were equally well resourced and advised by their respective lawyers. …”
Mr Ibrahim and EMI responded, with some force, that the Appellants did not explain how, even if Mr Ibrahim was an officer of EMIS, an expectation of disclosure arose where Mr Ibrahim was plainly involved in the Settlement Deed for EMI rather than for EMIS. They also submitted that the Appellants had pleaded, at first instance, misrepresentations made by Mr Ibrahim that he was not taking any steps to establish a Competing Business; that the Primary Judge had found there was no evidence that any of those representations were made; neither the grounds of appeal nor the Schedule challenged that finding; and, where there is an unchallenged finding that the representations were not established, then no question of reliance on them or causation in respect of them arises.
It seems to me that his Honour was correct in not finding misleading or deceptive conduct arising from a non-disclosure of any plans as to the Competing Business where the relevant negotiations were taking place at arm’s length and in circumstances that Dr Kyatt was rightly suspicious of Mr Ibrahim’s conduct and had no reason to think that matters adverse to his interests would be disclosed to him by Mr Ibrahim. The proposition that any expectation that disclosure is qualified in the context of arm’s length negotiations has been recognised in the case law and professional commentary: for example, Dubois v Ong [2004] QCA 185 at [40]; C Lockhart, The Law of Misleading or Deceptive Conduct, 6th ed, 2023 [5.20].
It is not necessary to determine whether the position would have changed had Mr Ibrahim then been an officer of EMIS because that was not established at first instance and the appeal against his Honour’s findings as to that matter has not succeeded. I recognise that non-disclosure in those circumstances is likely not treated as a breach of fiduciary duty under Australian law: P*&V Industries Pty Ltd v Porto* [2007] VSC 64 at [24]–[30]; Diakovasili v Order of AHEPA NSW Inc [2023] NSWSC 1282 at [190]. The Appellants referred to the possibility that positive duties of a company director may have a fiduciary character, left open on appeal on Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 89 ACSR 1; [2012] WASCA 157 at [1960]; Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132; [2023] NSWCA 48 at [111]. It is not necessary to resolve the complexities of that question in order to determine this appeal. It is also by no means self-evident that when a company and its director or officer are dealing with each other in a contentious negotiation either has an expectation of disclosure by the other. It is particularly unlikely that any representation that “[t]here would be no Competing Business” was made, by silence or otherwise, where it is not apparent that Dr Kyatt could have had any reasonable expectation that, simply because EMI had assigned the lease of the Original Premises to EMIS and the parties released each other from liabilities relating to the circumstances in which EMI had taken the lease of the premises, then EMIS would be free from competition from EMI into the indeterminate future.
“adopting the considerations raised in Osborne and the authorities referred to in it, in my opinion Dr Kyatt’s agreement to cl 13.2 of the Deed of Settlement (which states that “The Parties acknowledge that no reliance has been placed on any prior agreement, understanding or representation”) lends further support to the conclusion that Dr Kyatt did not rely on any alleged representation made by Mr Ibrahim. I consider that I should give effect to this solemn disclaimer of reliance in the present case.”
(3) No representation clauses and no reliance clauses and other forms of disclaimers can have an evidentiary effect that negates an integer of liability in relation to misleading or deceptive conduct. They may alter the character of a representation which was made. They may render conduct not misleading or deceptive. They may lead to a conclusion that a claimant did not rely upon the conduct or did not suffer loss because of the conduct. Such provisions, however, cannot otherwise have the effect of absolving a party from liability for misleading or deceptive conduct, even where their express terms purport to do so ….
(4) The potential for no representation clauses, no reliance clauses and other disclaimers to have the effect of negating an integer of liability emphasises the importance of assessing the entirety of the relevant conduct as a whole ….
(5) Exclusion clauses which purport to absolve liability under the Australian Consumer Law for misleading or deceptive conduct which has occurred and has caused loss cannot have effect in accordance with their terms where they are contained in a contract which the claimant has been misled into entering …. This principle extends to any contract which purports to absolve a misrepresentor from liability for misleading or deceptive conduct, even if the claimant was not misled into entering into the contract ….
(6) Although a person cannot contract out of liability for fraud or deceit, or out of certain statutory rights or entitlements, it generally remains possible for parties to compromise a dispute about fraud, deceit or breach of such statutory rights …. The question whether a particular contractual provision is properly characterised as a compromise of a dispute or as an attempt to contract out of liability for fraud, deceit or statutory rights is a question of construction of the provision in question.”
Orders
**********
Engadine Medical Imaging Services Pty Ltd atf The Engadine Unit Trust
Mena Ibrahim & Ors [2025] NSWCA 269
(2016) 340 ALR 580
(2007) 160 FCR 35
(2020) 270 CLR 1
(2018) 56 VR 674
(2009) 238 CLR 304
(2013) 214 CLR 118
(2012) 200 FCR 296
(1959) 101 CLR 298
(1989) 97 FLR 458
(2010) 241 CLR 357
(2010) 274 ALR 205
(2001) 207 CLR 165
(2012) 247 CLR 465
(2003) 87 SASR 1
(2018) 97 NSWLR 513
(2023) 74 VR 1
(1995) 49 NSWLR 315
(2023) 111 NSWLR 132
Appeal dismissed with costs ([133]).
The first ground of appeal challenges the Primary Judge’s approach to the evidence and several factual findings made by the Primary Judge. The second ground of appeal relates to a claim for a constructive trust over the business established by EMI. The third ground of appeal challenges the dismissal of the claims against the several Respondents. The fourth ground of appeal relates to the Settlement Deed. The fifth and sixth grounds of appeal, added by the First Further Amended Notice of Appeal, relate to two breaches of the duties alleged against each of Mr Ibrahim and Mr Chaudhry.
As the Primary Judge observed (Judgment [50]), on 22 February 2018, Mr Inayat, an accountant working with Dr Kyatt, introduced himself to the lessor of the Original Premises as now the accountant for EMIS and indicated he would deal with some matters relating to those premises.
As the Primary Judge also observed (Judgment [56]), in September 2018, Dr Kyatt and Messrs Ibrahim and Chaudhry exchanged messages concerning steps that they would take to “close down” a third party radiology practice in Dapto by taking staff away from that practice, although they would advertise for the relevant positions on a third party site rather than approach the staff directly. Mr Chaudhry recognised the effect of that approach in an email dated 25 September 2018 to Dr Kyatt and Mr Ibrahim which observed that:
The Appellants also drew attention to correspondence and documents relating to a proposed rebranding of several practices associated with Mr Chaudhry and the Engadine practice to “Focus Radiology”, which they contend was developed without Dr Kyatt’s consent or involvement. That proposal was ultimately not implemented in respect of the business operated by EMIS at the Original Premises and the Competing Business opened by EMI at the New Premises instead opened under that name. The Primary Judge reviewed the steps taken in respect of the rebranding in detail (Judgment [127]ff, [155]ff, [194]ff, [278]ff and [411]–[412]). I will return to that matter below.
On 12 July 2022, EMI, in a letter signed by Mr Ibrahim, advised Dr Kyatt and Mr Chaudhry that EMIS’s lease of the Original Premises had expired, that they had “failed, neglected and/or refused to renew the Lease and/or enter into negotiations in respect of the continued tenure at the Premises” and that EMI had now entered into a lease in respect of the Original Premises and required EMIS to vacate the premises. There is no doubt that this step and the steps by which EMI acquired the lease were adverse to EMIS but the question remains whether Mr Ibrahim owed a duty to EMIS which was breached by these steps. I return to that question below.
After the receipt of that letter, on 12 July 2022, Mr Chaudhry sent an email to Mr Ibrahim, with a copy to Dr Kyatt, expressing surprise to what had occurred, observing that:
As I have noted above, the Primary Judge reviewed the steps taken in the rebranding at length in the Judgment. Where the Plaintiffs had not pleaded a claim arising from the rebranding, as distinct from a claim as to the Competing Business trading under the “Focus Radiology” name, there was no need for the Primary Judge to seek to resolve the gaps and implicit contradictions in the Plaintiffs’ approach to the rebranding. However, where this matter is pressed on appeal, I should note that these gaps and contradictions include at least that the Appellants complained that Dr Kyatt had not consented to the rebranding, although he had by then relocated to Jordan and appears to have left the management of the Engadine business to Mr Chaudhry; the Appellants do not appear to have taken a position at first instance or on appeal as to whether the rebranding would have been advantageous or disadvantageous to EMIS, so that it should or should not have proceeded in respect of EMIS, had it been authorised; and they ultimately complained, likely inconsistently, that the rebranding was not authorised in respect of EMIS and that it was implemented in respect of EMI at the New Premises and not in respect of EMIS. Where the rebranding was not authorised by Dr Kyatt in respect of EMIS, there is no obvious basis for a complaint that it was not implemented in respect of EMIS; and, where the Plaintiffs did not contend that the rebranding would have been advantageous to EMIS, there is also no basis for a complaint that it was not implemented in respect of EMIS or that EMIS was left to trade (had it continued to do so) under its former name. These issues did not need to be resolved at first instance because the Plaintiffs’ pleaded (and real) complaint was that EMIS had opened the Competing Business and the development of the rebranding and the fact that the Competing Business traded under the name “Focus Radiology” were background facts to that complaint.
I first address the Primary Judge’s challenged findings in respect of the claim that Mr Ibrahim was an officer of EMIS, including factual findings challenged in the Schedule. In dealing with this question, the Primary Judge referred to the definition of “officer” in s 9AD of the Act, on which Counsel below relied, although it is now common ground that the relevant definition was then found in s 9 of the Act and was in relevantly identical terms. That section relevantly provided that an “officer” of a corporation is a person who makes or participates in making decisions that affect the whole or a substantial part of a corporation’s business or who has the capacity to affect significantly the corporation’s financial standing or in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (subject to an exclusion that is not relevant here): Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; (2007) 62 ACSR 427; [2007] FCA 963 at [490]; Morley v Australian Securities and Investments Commission (2010) 274 ALR 205; [2010] NSWCA 331 at [893]; Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; (2012) 88 ACSR 126; [2012] HCA 18 (“Shafron”).
In Shafron at [23], in discussing paragraph (b)(i) of the definition of “officer”, the plurality in the High Court observed that the necessary inquiry is directed to what role the person in question plays in the corporation although it is not confined to the role that the person played in relation to the alleged breach of duty. Their Honours observed (at [25]) that:
Mr Ibrahim and EMI respond that the rebranding was not relied on at first instance as a basis on which it was said that Mr Ibrahim was an officer of EMIS, although they accept that it was relied on to establish a breach of Mr Ibrahim’s duties as an officer. It is not necessary to decide that question. Mr Ibrahim and EMI also point out that the Schedule did not seek a factual finding that the rebranding constituted a basis on which Mr Ibrahim was an officer of EMIS. I have addressed the question of rebranding above. I am not persuaded that the proposition that Mr Ibrahim was a person on whose instructions the directors of EMIS were accustomed to act with respect to the rebranding of the Engadine practice was established by the Appellants, where Mr Ibrahim’s involvement appears to have been with the rebranding of the Competing Business established by EMI in competition with EMIS, rather than with the proposal to, or subsequent failure to, rebrand the Engadine practice operated by EMIS .
I recognise that the matters on which the Appellants rely must be considered as a whole, together with the significant number of findings that were favourable to the Appellants that were made by the Primary Judge and with reference to any inference is available to assist the Plaintiffs by the application of the principles in Jones v Dunkel. The question whether Mr Ibrahim was an “officer” of EMIS also needs to be approached in the context that the Primary Judge had found, and the Appellants do not challenge his findings that, Dr Kyatt obtained “total control of the day-to-day management of the [EMIS Practice] and assumed the capacity to make all decisions in relation to it” from February 2018 and Mr Ibrahim thereafter “had no power to manage the [EMIS business] as Advanced Imaging alone, acting through Dr Kyatt, had total control of the day-to-day management of, and decision-making in relation to, the [EMIS Practice]” (Judgment [47], [49]). Plainly, Dr Kyatt was less active in the business after he relocated to Jordan in 2019, but the Primary Judge found, and there is also no challenge to the finding that, Mr Chaudhry then “took over management of the Engadine Practice and assumed primary responsibility for day-to-day operations at that time (Judgment [72]). It seems to me that the Primary Judge was correct in taking the view that each of these matters did not establish that Mr Ibrahim was an officer of EMIS and the totality of them also do not establish that matter.
For completeness, as I noted above, recital H of the Settlement Deed recorded the position of the parties that:
The second aspect of this ground of appeal is that, if the pleaded duties existed, the Primary Judge erred by failing to find that Mr Ibrahim breached them by acting in the manner pleaded in FASOC [25.12] by:
It seems to me that it is not possible, even with the aid of Jones v Dunkel, to infer Mr Chaudhry’s involvement in EMI’s opening the Competing Business in the New Premises from his receipt of the Crowd IT proposal, where it was also directed to the other practices with which he was involved and he had a proper interest in receiving it on that basis. In any event, the signature certificate in respect of that proposal recorded that Mr Chaudhry viewed it on 26 February 2023 and signed it on the same day, after he had been removed as a director of EMIS, and there was no evidence to support an inference that he had reviewed it an earlier date. It also seems to me that, where it was not shown that Mr Chaudhry took any positive steps to obtain the New Lease for EMI or took any active step in EMI’s business before he was removed as a director of EMIS, and having regard to the evidence as to the rebranding to which I have referred, the evidence is at least equally consistent with Mr Chaudhry’s merely standing by while Mr Ibrahim took steps to obtain the New Lease and establish the Competing Business for the benefit of EMI. The Appellants did not, at first instance or on appeal, seek to establish Mr Chaudhry’s liability on that basis, as distinct from putting, in strong terms, allegations of active wrongdoing on his part and that he was actively involved in wrongdoing by Mr Ibrahim. While the principle in Jones v Dunkel would allow the Primary Judge more readily to draw an inference that was available from the evidence as to Mr Chaudhry’s involvement, it seems to me that his Honour was correct in finding that he could not draw that inference in the absence of an evidentiary basis for it.
The fifth matter on which the Appellants relied is that other documents were not available from mid-December 2022 because efforts were taken to ensure there was no paper trail revealing Mr Chaudhry’s involvement (Judgment [276(3)]), but that is a matter that would be relevant to allow inferences more readily to be drawn if some evidentiary basis for them is established, and none is here. The sixth matter is that Mr Chaudhry was copied into emails relating to the Competing Business shortly after his resignation as a director of EMIS on 17 March 2023, but nothing turns on this if he had previously been removed as a director of EMIS in February 2023. The Appellants also pointed to the fact that Mr Chaudhry did not give evidence as to these matters, but, as the Primary Judge rightly recognised, a Jones v Dunkel inference could not be used to reach positive findings that are adverse to Mr Chaudhry without an evidentiary basis, as distinct from drawing inferences with greater confidence where there was a proper basis for them. This matter does not assist the Appellants where it occurred after Mr Chaudhry had been removed as a director of EMIS and his statutory and fiduciary duties to EMIS had ceased, for the reasons I have noted above. The seventh matter is that the steps that Mr Chaudhry had taken were within his knowledge and he had not given evidence of them, but that is a matter that will be relevant to allow inferences more readily to be drawn if some evidentiary basis for them is established.
For these reasons, the fifth and sixth grounds of appeal are also not established against either Mr Ibrahim or Mr Chaudhry.
The Appellants did not press a further contention (Schedule [7.1]–[7.2]) that the Primary Judge erred (Judgment [374(5)]) in finding that Dr Kyatt did not rely on the three alleged representations as to the “Competing Business” (as defined), and in failing to find that Dr Kyatt relied on such representations. Nonetheless, the Appellants referred to a somewhat fine distinction that was drawn by Dr Kyatt in cross-examination at first instance where he accepted that he knew that Mr Ibrahim wanted to “take the business” but did not accept that he knew that Mr Ibrahim could do so by establishing a competing business. Mr Ibrahim and EMI responded by reference to several findings of the Primary Judge (for example, Judgment [146], [241], [247], [254], [284]) that are relevantly unchallenged, which are inconsistent with Dr Kyatt’s giving weight to any representation, whether express or implied from silence, that Mr Ibrahim did not seek to establish a competing business or take over EMIS’s business. It seems to me that once Dr Kyatt knew that Mr Ibrahim wanted to take the business, as he accepted and where he was an experienced businessman as the Primary Judge had found, the possibility that Mr Ibrahim could seek to do so by establishing a competing business must have been obvious to Dr Kyatt.
The Appellants also did not press a contention (Schedule [9.1]–[9.2]) that the Primary Judge erred (Judgment ([374(7)]) in finding that Dr Kyatt did not rely on a statement in an email dated 15 February 2023 from Mr Ibrahim’s solicitors that “there would be no loss to your client to include this release and in failing to find that Dr Kyatt did rely on that statement”. Mr Ibrahim and EMI in turn pointed to findings made by the Primary Judge (for example, Judgment [201], [310], [376]) that, unsurprisingly, Dr Kyatt had relied on his legal advisers in executing the Settlement Deed rather than on representations made by Mr Ibrahim or Mr Ibrahim’s advisers. These findings have lesser significance where the Appellants no longer challenge the Primary Judge’s findings that they had not relied on Mr Ibrahim or his solicitors in respect of the execution of the Settlement Deed.
I recognise that, in some circumstances, causation can be established in a misleading or deceptive conduct case absent reliance. However, it does not seem to me that it can be established here, where Mr Ibrahim’s silence as to the risk that he or EMI would establish the Competing Business cannot have had any causative effect unless Dr Kyatt relied on it to understand that that would not occur. In the course of the hearing of the appeal, the Appellants relied on an aide memoir which, under the heading “reasonable expectation”, contended for a counter-factual that had Mr Ibrahim disclosed one or more of three matters prior to the execution of the Settlement Deed on 23 February 2023, then the Settlement Deed would not have been executed, the release under that Settlement Deed would not have been provided, EMIS would not have taken the assignment of the lease, Dr Kyatt would not have guaranteed EMIS’s obligations and they would therefore have no liability in relation to the that lease. So far as that proposition is relied on for a claim of causation, it has the difficulties that no such factual finding was identified in the Schedule; the Primary Judge rejected Dr Kyatt’s reliance evidence, so far as it goes to those issues and the Appellants do not now attack that finding; and no inference to that effect could be drawn without evidence. If Dr Kyatt had been told that EMI was planning to operate a competing business from other premises, the first course available to him was to seek to preserve the value of EMIS’s business and his investment in it which would likely have required that he execute the Settlement Deed (as he did) so as to retain the right to occupy the Original Premises and then seek to retain EMIS’s existing staff or recruit new staff. A second available course would have been not to execute the Settlement Deed and simply surrender EMIS’s business to EMI without seeking to defend it and, implicitly, abandon his existing investment in the business. There is no basis to find without evidence that, on the balance of probabilities, Dr Kyatt (as he now contends) would have taken the second course rather than the first if faced with that choice.
The Appellants also challenged the Primary Judge’s analysis (Judgment [372]) of the effect of a contractual disclaimer in a claim of misleading or deceptive conduct, where he referred to Osborne v Iris Diversified Property Pty Ltd [2014] NSWSC 1488 at [25]–[31], and his finding (Judgment [377]) that: