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

[2024] NSWSC 1399

Supreme Court

New South Wales

Medium Neutral Citation:

Engadine Medical Imaging Services Pty Ltd as trustee for the Engadine Unit Trust v Mena Ibrahim [2024] NSWSC 1399

Hearing dates:

13, 15 and 16 May 2024

Date of orders:

06 November 2024

Decision date:

06 November 2024

Jurisdiction:

Equity

Before:

McGrath J

Decision:

(1) The further amended statement of claim filed 18 July 2024 is dismissed.

(2) The plaintiffs are to pay the costs of the defendants.

Catchwords:

CONSUMER LAW — misleading or deceptive conduct — representations as to future matters — silence or non-disclosure — alleged representations by first defendant as to ongoing operation of the first plaintiff’s business, lease of business premises, value of business, establishment of competing business, and terms of deed of settlement — insufficient evidence that the pleaded representations were made — insufficient evidence of and evidence contraindicating reliance by plaintiffs on alleged representations — HELD — claims of misleading or deceptive conduct against first defendant dismissed — deed of settlement applies in accordance with its terms

CORPORATIONS — directors and officers — whether first defendant was an officer of the first plaintiff — s 9AD(1)(b) Corporations Act — where first defendant participated in some decisions affecting corporation’s business — insufficient to make him an officer of the company — directors’ duties — alleged breach by third defendant of statutory and fiduciary duties — duty not to use information improperly — duty not to use position as director improperly — duty of care and diligence — duty to act in good faith in best interests of company — alleged breaches involving failure to exercise lease option, establishing competing business, and taking staff and business — insufficient evidence of pleaded conduct by third defendant said to constitute breaches — HELD — first defendant not an officer of first plaintiff; unnecessary to determine associated claims against him — claim against third defendant dismissed

EQUITY — breach of confidence — first defendant’s access to first plaintiff’s confidential business and financial information — alleged misuse by first defendant — plaintiffs’ failure to identify confidential information with precision — failure to particularise misuse or resulting loss to plaintiffs — HELD — breach of confidentiality claim against first defendant dismissed

Legislation Cited:

Competition and Consumer Act 2010 (Cth) s 131, Schedule 2 — Australian Consumer Law, ss 4, 18, 236, 237, 243

Corporations Act 2001 (Cth) s 9AD, 180, 181, 182, 183

Cases Cited:

Admiral International Pty Ltd v Insurance Australia Ltd [2022] NSWCA 277

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25

Coco v AN Clark (Engineers) Ltd [1969] RPC 41

Effem Foods Pty Limited v Lake Cumbeline Pty Limited [1999] HCA 15; (1999) 161 ALR 599

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79

Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187

Jones v Dunkel (1959) 101 CLR 298

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11

Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458

Lin v Zheng [2023] NSWCA 174

Ling v Pang [2023] NSWCA 112

Manly Council v Byrne [2004] NSWCA 123

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31

Mudgee Dolomite & Lime Pty Ltd v Robert Francis Murdoch; In the matter of Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510

Osborne v Iris Diversified Property Pty Limited [2014] NSWSC 1488

Payne v Parker [1976] 1 NSWLR 191

Re ColoradoProducts Pty Ltd (in prov liq) [2014] NSWSC 789

Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18

Société d'AvancesCommerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The “Palitana”) (1924) 20 Ll L Rep 140

SSABR Pty Ltd v AMA Group Limited [2024] NSWCA 175

Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 85 NSWLR 196; [2013] NSWCA 2

Touma v Highfields Australia Pty Ltd [2024] NSWCA 160

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55

Watson v Foxman (1995) 49 NSWLR 315

White Constructions Pty Ltd v PBS Holdings Pty Ltd [2020] NSWCA 277

Wormald v Maradaca Pty Ltd [2020] NSWCA 289

Category:

Principal judgment

Parties:

Engadine Medical Imaging Services Pty Ltd ATF the Engadine Unit Trust (First Plaintiff)
Ali Kyatt (Second Plaintiff)
Advanced Imaging Pty Ltd ATF the Kyatt Family Trust (Third Plaintiff)
Mena Ibrahim (First Defendant)
Engadine Medical Imaging Pty Ltd (Second Defendant)
Nabeel Chaudhry (Third Defendant)
Warilla Diagnostic Imaging Pty Ltd ATF Warilla Diagnostic Image Trust trading as Focus Radiology (Fourth Defendant)
Focus Radiology Dapto Pty Ltd (Fifth Defendant)
Focus Radiology Warrawong Pty Ltd (Sixth Defendant)
Dapto Imaging Pty Ltd ATF the Dapto Medical Imaging Unit Trust (Seventh Defendant)
Warrawong Imaging Pty Ltd ATF the Warrawong Medical Imaging Unit Trust (Eighth Defendant)

Representation:

Counsel:
M Pesman SC and M Klooster (Plaintiffs)
M Condon SC and M Collins (First, Second, Seventh and Eighth Defendants)
G Sirtes SC and F Di Lizia (Third, Fourth, Fifth and Sixth Defendants)

Solicitors:
New South Lawyers (Plaintiffs)
Bridges Lawyers (First, Second, Seventh and Eighth Defendants)
Madison Marcus (Third, Fourth, Fifth and Sixth Defendants)

File Number(s):

2023/00134691

Publication restriction:

Nil

TABLE OF CONTENTS

JUDGMENT

INTRODUCTION

EVIDENCE

Dr Kyatt’s evidence

Jones v Dunkel inference against the defendants

RELEVANT FACTS

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

The Engadine Practice and the Engadine Premises

Engadine Imaging Trust

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

Establishing the Dapto Practice

2019 financial position of EMIS

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

Pay rise approved for Dannielle Coles

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

2020 financial position of EMIS

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

Dr Kyatt’s employment at I-MED

Distribution of funds from the Engadine Practice

Termination of employment of staff member at the Engadine Practice

2021 financial position of EMIS

Attempts to renew the Lease

Incorporation of Engadine Medical Imaging

Focus Radiology rebranding

New Lease of Engadine Premises and Dr Kyatt’s responses

Further developments in the Focus Radiology Group rebranding process

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

Dispute between Dr Kyatt and Mr Ibrahim regarding the New Lease

Distribution of profits from Engadine Practice

Lease of the Focus Engadine Premises

Continuation of Focus Radiology rebranding process

Negotiations regarding the New Lease and Deed of Settlement and Release

2022 financial position of EMIS

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

Establishment of Focus Radiology Engadine

Inferences about Focus Radiology rebranding and knowledge of Dr Kyatt

Finalising the Deed of Settlement and Release and Deed of Assignment

Removal of Mr Chaudhry as a director of EMIS

Deed of Settlement and Deed of Assignment executed

Mr Chaudhry resigns from EMIS

Continuous operations of EMIS to March 2023

Focus Radiology Engadine practice commences

ISSUE 1: THE CLAIMS AGAINST MR IBRAHIM

Was Mr Ibrahim an officer of EMIS?

Misleading or deceptive conduct claim against Mr Ibrahim

The pleaded case

Legal principles

Statutory provisions

Authorities

Silence

Causation and remedies

Consideration

Confidential information claim against Mr Ibrahim

ISSUE 2: THE CLAIMS AGAINST MR CHAUDHRY

Breaches of Corporations Act and fiduciary duties by Mr Chaudhry

Pleaded case

Statutory provisions

Authorities

Consideration

ISSUE 3: RELIEF

ORDERS

JUDGMENT

INTRODUCTION

1. These proceedings are brought by the plaintiffs, Engadine Medical Imaging Services Pty Ltd (EMIS) as trustee for the Engadine Unit Trust, Dr Ali Kyatt and Advanced Imaging Pty Ltd as trustee for the Kyatt Family Trust, against various defendants being:

1. Mena Ibrahim (First Defendant);

2. Engadine Medical Imaging Pty Ltd (Second Defendant);

3. Nabeel Chaudhry (Third Defendant);

4. Warilla Diagnostic Imaging Pty Ltd as trustee for Warilla Diagnostic Image Trust trading as Focus Radiology (Fourth Defendant);

5. Focus Radiology Dapto Pty Ltd (Fifth Defendant);

6. Focus Radiology Warrawong Pty Ltd (Sixth Defendant);

7. Dapto Imaging Pty Ltd as trustee for the Dapto Medical Imaging Unit Trust (Seventh Defendant); and

8. Warrawong Imaging Pty Ltd as trustee for the Warrawong Medical Imaging Unit Trust (Eighth Defendant).

2. The scope of the plaintiffs’ claims significantly narrowed over the course of the proceedings, particularly during the three-day hearing before me when substantial claims against the defendants were dropped. The narrowing of the claims, however, still involves my consideration of a vast amount of factual material.

3. The allegations and relief now sought by the plaintiffs are contained in the further amended statement of claim (FASOC), which was provided to me in draft form on 16 May 2024 (after the conclusion of the hearing) and which was filed by the plaintiffs on 18 July 2024 pursuant to leave granted by me.

4. In short, the plaintiffs seek relief:

1. in respect of alleged breaches by Mr Chaudhry of duties owed under the Corporations Act 2001 (Cth) and fiduciary duties owed by him as a director to EMIS;

2. in respect of alleged breaches by Mr Ibrahim of duties owed under the Corporations Act and fiduciary duties owed by him as an officer to EMIS;

3. in respect of alleged breaches of confidence by Messrs Chaudhry and Ibrahim; and

4. under the Australian Consumer Law (ACL) in Schedule 2 to the Competition and Consumer Act 2010 (Cth) for misleading or deceptive conduct by Mr Ibrahim.

5. Initially the proceedings involved much wider allegations about an alleged joint venture agreement (JVA) between Dr Kyatt, Mr Ibrahim and Mr Chaudhry in relation to four radiology practices operating in suburbs south of Sydney (the Lakemba Practice, the Dapto Practice, the Warrawong Practice and the Engadine Practice). However, in the course of the hearing before me, the plaintiffs abandoned their allegations regarding the JVA and confined their claims to the parties’ relationships and dealings in connection with the Engadine Practice alone. This is very significant in relation to the allegations which remained in the proceedings because all of the factual allegations concerning the ownership, operation and management of the Lakemba Practice, the Dapto Practice and the Warrawong Practice were specifically removed from the FASOC.

6. The defendants contest the existence of the remaining alleged obligations which the plaintiffs contend have been breached. Mr Ibrahim filed his defence on 24 August 2023 (Mr Ibrahim’s defence) and Mr Chaudhry filed his defence on 16 August 2023 (Mr Chaudhry’s defence).

7. I note that no claims against Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging or Warrawong Imaging are pressed. On 15 May 2024, I made orders dismissing the proceedings against Warilla Diagnostic Imaging, with costs reserved. Although the FASOC sets out relief claimed against Engadine Medical Imaging (at prayers 12–18), the plaintiffs’ written submissions in closing state that those remedies do not require my attention, for reasons to do with a Deed of Settlement and Release dated 23 February 2023 between Engadine Medical Imaging, Mr Ibrahim, EMIS and Dr Kyatt, the precise terms and implications of which are detailed below, and the effect of which is that whether the claim against Mr Ibrahim succeeds or fails, the relief claimed against Engadine Medical Imaging will be either otiose (in the former case) or unavailable (in the latter). On that basis, I will also dismiss the proceedings against Engadine Medical Imaging, Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging and Warrawong Imaging.

8. Accordingly, this judgment only addresses the claims against Messrs Ibrahim and Chaudhry which are limited to their involvement with EMIS. The substantive issues that I am required to determine are as follows:

1. whether Mr Ibrahim was an officer of EMIS, and, if so, whether he breached duties owed by him to EMIS as an officer of EMIS;

2. whether Mr Chaudhry, as a director of EMIS, breached his duties to EMIS;

3. whether Messrs Ibrahim and Chaudhry misused confidential information; and

4. whether there are any grounds under the ACL for setting aside the Deed of Settlement (in whole or in part).

EVIDENCE

9. At the hearing, EMIS, Dr Kyatt and Advanced Imaging relied on evidence from Dr Kyatt and Ameer Al-Khigani, a business associate of Dr Kyatt.

10. Neither Mr Ibrahim nor Mr Chaudhry read any affidavits, gave evidence or called any witnesses in the proceedings. On this basis the plaintiffs ask that I draw a Jones v Dunkel inference in respect of their failure to give evidence as well as their failure to call Dannielle Coles as a witness in their respective cases. I have addressed the issue of the Jones v Dunkel inferences in more detail below.

11. Mr M Pesman SC appeared with Mr M Klooster for EMIS, Dr Kyatt and Advanced Imaging, instructed by New South Lawyers. Mr M Condon SC appeared with Mr M Collins for Mr Ibrahim, instructed by Bridges Lawyers. Mr G Sirtes SC appeared with Mr F Di Lizia for Mr Chaudhry, instructed by Madison Marcus.

Dr Kyatt’s evidence

12. At the hearing, Dr Kyatt was cross-examined by Mr Condon SC and Mr Sirtes SC on multiple issues.

13. The approach of a trial judge to the assessment of the credibility and reliability of a witness who gives evidence in a trial has a number of aspects which are relevant to these proceedings. The salient principles are as follows:

1. In circumstances where events have taken place long ago, the orthodox and sensible approach for a trial judge to take in assessing the credibility and reliability of the evidence of a witness about those events is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence: Effem Foods Pty Limited v Lake Cumbeline Pty Limited [1999] HCA 15; (1999) 161 ALR 599, Gleeson CJ, Gaudron, Kirby and Hayne JJ at [15]–[16].

2. Scientific research has cast doubt on the ability of a trial judge to tell truth from falsehood accurately based on the appearance of witnesses such that trial judges should limit their reliance on the appearances of witnesses and reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, Gleeson CJ, Gummow and Kirby JJ at [30]–[31].

3. There are multiple problems with a trial judge making demeanour findings, ranging from systematic error or bias, memory malfunctions, and the possibility that witnesses may be dishonest about only parts of their evidence, that a truthful witness may give accurate or inaccurate testimony and that a dishonest witness may appear to be truthful. A trial judge should keep in mind the guidance provided in Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 by Ipp JA (with whom Mason P and Tobias JA agreed) who said at [27]:

These problems and doubts about demeanour findings explain why trial judges are expected to weigh their impressions as to demeanour carefully against the probabilities and to examine whether the disputed evidence is consistent with the incontrovertible facts, facts that are not in dispute and other relevant evidence in the case. Of course, demeanour may trump the probabilities, but it should be apparent from the judge's reasons that the probabilities and consistency with other relevant evidence have properly been taken into account.

4. A trial judge should exercise restraint when forming a view about the credibility of a witness based on demeanour in giving evidence because it is a stressful and unfamiliar experience for most people, and particular care must be exercised in making demeanour findings where a witness is from a different cultural and ethnic background to that with which the trial judge is familiar: Goodrich, Ipp JA at [21]. As observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The “Palitana”) (1924) 20 Ll L Rep 140, by Atkin LJ at 152 (cited in Fox v Percy at [30]):

… an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.

5. The assessment of the credibility of a witness is a larger concept than demeanour and the latter is not to be overemphasised: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2020] NSWCA 277, Bell P (as the Chief Justice then was) at [106] citing Goodrich at [16]–[27] (White JA agreeing generally at [155]–[156]); Admiral International Pty Ltd v Insurance Australia Ltd [2022] NSWCA 277, Bell CJ (Ward P and Macfarlan JA agreeing) at [102]–[103], citing White and Goodrich.

6. It is important to bear in mind that the ordinary human experience of a witness makes their memory of conversations fallible, as eloquently stated in the following oft-cited passage in Watson v Foxman (1995) 49 NSWLR 315, by McLelland CJ in Eq at 319 (recently approved in Touma v Highfields Australia Pty Ltd [2024] NSWCA 160, Basten AJA at [18] White and Adamson JJA agreeing):

… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

14. As will be apparent from the factual findings I have set out below, I formed an adverse view of the credibility and reliability of the evidence given by Dr Kyatt. In doing so, I recognised that Dr Kyatt is from Jordan and English is not his first language, which is apparent from the staccato and ungrammatical way he expressed himself in multiple emails and throughout his cross-examination. I did not make any of my findings about Dr Kyatt’s credibility and reliability based on his demeanour in the witness box alone. Dr Kyatt’s own counsel stated that he “struggled in cross-examination … plainly very aggrieved by what he perceives … to be the misconduct of Mr Ibrahim and Mr Chaudhry”. In the main, I have set aside the way in which Dr Kyatt conducted himself and given him the benefit of doubt in relation to the obvious infelicities in his expression when I assessed his evidence.

15. The views that I formed of Dr Kyatt’s evidence are primarily based on the probabilities and the objective factual surrounding material, which mainly comprise the documents in evidence. Repeatedly, Dr Kyatt evaded answering direct questions and refused to concede obvious propositions arising from contemporaneous documents. He gave answers which were internally inconsistent and objectively improbable. On critical matters relevant to the claims he propounded I have not accepted his evidence.

16. I have made these findings even though I have not been required to assess the credibility and reliability of Dr Kyatt’s evidence against the evidence of any other witness. Dr Kyatt’s evidence was in itself unsatisfactory on multiple occasions.

17. The evidence on which I have made credit findings against Dr Kyatt is set out below.

Jones v Dunkel inference against the defendants

18. The rule in Jones v Dunkel (1959) 101 CLR 298, being the principle articulated by Kitto J at 308, Menzies J at 312 and Windeyer J at 320–321, has been distilled, summarised, expanded and explained in a number of authorities in the High Court of Australia and the Court of Appeal of this court, principally including Payne v Parker [1976] 1 NSWLR 191, Glass JA at 201; Manly Council v Byrne [2004] NSWCA 123, Campbell J (Beazley JA and Pearlman AJA agreeing) at [44]–[61]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, Heydon, Crennan and Bell JJ at [63]; Ling v Pang [2023] NSWCA 112, Kirk JA (Leeming and Mitchelmore JJA agreeing) at [20]–[28]; SSABR Pty Ltd v AMA Group Limited [2024] NSWCA 175, Stern JA (Ward P and Price AJA agreeing) at [158]–[161]. These authorities support the following legal principles:

1. The rule in Jones v Dunkel is a principle of judicial reasoning which addresses the drawing of inferences of fact.

2. The unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case.

3. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.

4. The drawing of a Jones v Dunkel inference requires the court to be satisfied that, first, it is expected or natural for the party in question to have called the person; second, the person’s evidence would have elucidated a particular matter; and third, the absence of the person is unexplained.

5. The rule in Jones v Dunkel only applies once all the evidence in the case is in.

6. Whether some inference should be drawn, what inference, and with what significance, are all matters that depend upon the particular case.

7. In some cases no inference will be drawn merely because corroborative or cumulative witnesses are not called.

8. The rule in Jones v Dunkel cannot be used to draw a positive inference if the evidence does not otherwise admit of a rationally drawn inference.

9. The rule in Jones v Dunkel does not permit a court to infer that the uncalled evidence would have been positively damaging to a party’s case.

10. The rule in Jones v Dunkel does not supply missing gaps in the evidence.

19. In the present case, Mr Chaudhry and Mr Ibrahim are parties in the proceedings who were not called to give evidence, in circumstances where it would be expected that they would each do so in their own cause and where their respective absences are unexplained. As a result, I will apply the rule in Jones v Dunkel in accordance with the principles stated above in relation to their failure to give evidence to draw the particular inferences that I have identified below.

20. In respect of the defendants’ failure to call as a witness or put on evidence given by Ms Coles, a business operations manager employed by one or more of the radiology practices owned by Messrs Ibrahim and/or Mr Chaudhry at different times and whose involvement in relevant events is disclosed in the following section of the judgment, I will also apply the rule in Jones v Dunkel. My reasons for doing so, and the inferences I am accordingly prepared to draw, are set out below.

RELEVANT FACTS

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

21. In around mid 2011, Dr Kyatt (a radiologist) and Mr Chaudhry (a sonographer) first met. At this time, Dr Kyatt was living in Griffith, New South Wales, and working for I-MED Radiology. Mr Chaudhry introduced Dr Kyatt to Mr Chaudhry’s business partner, Shahid Iqbal. Mr Chaudhry mentioned to Dr Kyatt that they were considering opening a radiology practice in Griffith and asked if Dr Kyatt would like to join them. Dr Kyatt declined to be involved.

22. On 21 September 2011, Mr Chaudhry sent an email to Dr Kyatt reiterating that they were seriously considering establishing a radiology practice in Griffith, and potentially expanding into the surrounding rural areas, and said that they were happy to offer Dr Kyatt the same wage as he was currently getting plus 10% of the profits with no need for Dr Kyatt to make any financial input. To Dr Kyatt’s knowledge, that proposed business venture involving Messrs Chaudhry and Iqbal did not go ahead.

23. In or around 2015, Mr Chaudhry called Dr Kyatt and requested his assistance with performing certain medical procedures, including nerve root injections, performing biopsies under ultrasound guidance and joint injections, at a practice that Mr Chaudhry operated, jointly with a neurologist, in Kingswood, New South Wales (Kingswood Practice). Dr Kyatt subsequently performed work as a contractor at the Kingswood Practice on several occasions on weekends.

24. On 11 May 2015, Mr Chaudhry sent an email to Dr Kyatt in which he said he would like to offer Dr Kyatt a proposal to come and work at the Kingswood Practice, that they were able to match what Dr Kyatt was on in Griffith and that they could even give him equity in the businesses. Mr Chaudhry asked Dr Kyatt to let him know if he was interested and said that they could meet up and discuss further.

25. In about November 2015, Dr Kyatt was approached by Mr Chaudhry and Mr Ibrahim, who offered him employment at their three radiology practices in the Sutherland Shire and Illawarra areas, in the suburbs of Engadine, Warilla and Woonona. In an email dated 8 November 2015 to Dr Kyatt, Mr Chaudhry said that with Dr Kyatt working with Mr Chaudhry and Mr Ibrahim, they could grow and expand in the future. In the letter dated 8 November 2015 on the letterhead of Woonona Medical Imaging which was attached to that email, Mr Chaudhry formally offered Dr Kyatt employment as a radiologist working at each of the Engadine Practice, the Warilla Practice and the Woonona Practice at a daily rate of $3,800 inclusive of GST. The term of the employment was expressed to be “until Dr Ali Kyatt needs to leave for overseas”. The letter also included the following statement under the sub-heading “Equity Partnership”:

If everything progresses well and if you don’t end up leaving overseas, we are also happy to discuss an equity partnership in all 3 practices.

26. In early 2016, Dr Kyatt relocated from Griffith to Sydney and began working for Mr Chaudhry and Mr Ibrahim at the Engadine Practice, the Warilla Practice and the Woonona Practice as a contractor radiologist paid by session. Also around this time, Dr Kyatt, Mr Chaudhry and Mr Ibrahim entered into discussions and negotiations, which took place in person, to enter into business together. Messrs Chaudhry and Ibrahim proposed that Dr Kyatt would purchase shares in one or more of the Engadine Practice, the Warilla Practice and the Woonona Practice. Those discussions continued to around mid-2016 but did not result in any agreement being reached.

The Engadine Practice and the Engadine Premises

27. In 2009, the Engadine Practice was established by Mr Ibrahim and was conducted by Advanced Medical Imaging Pty Ltd (AMIS, which later changed its name to Advanced Medical Fitouts Pty Ltd), of which Mr Ibrahim was the sole director and shareholder. As a result, Mr Ibrahim was managing the Engadine Practice from that time until the events of February 2018 which are outlined below.

28. In around April 2016, Dr Kyatt was provided with access to the financial books and records of the Engadine Practice for the 2013, 2014 and 2015 financial years.

29. On 23 June 2016, EMIS was incorporated, with Dr Kyatt as its sole director and secretary and Advanced Imaging as its sole shareholder. Dr Kyatt is the sole director of Advanced Imaging and Dr Kyatt and his wife are the equal shareholders of Advanced Imaging.

30. On 1 February 2017, the Lease of premises at Suite 3/24–28 Station St, Engadine (Engadine Premises) was entered into between Peter and Robyn Thompson (as lessors) and Pulse Medical Imaging Engadine Services Pty Ltd (as lessee). Pulse Medical was a company controlled by Messrs Ibrahim and Chaudhry. The Lease was signed by Messrs Ibrahim and Chaudhry on behalf of Pulse Medical.

31. The Lease had a commencement date of 1 February 2017 and a termination date of 31 January 2022. The Lease included an option to renew for a further five-year term, which had to be exercised within a period of three months before the expiry of the Lease, namely by 31 October 2021. I infer that as signatories to the Lease, each of Messrs Ibrahim and Chaudhry knew that the option had to be exercised under the Lease by 31 October 2021 and that the Lease expired on 31 January 2022.

32. In October 2017, negotiations resumed concerning the potential acquisition by Dr Kyatt of an interest in the radiology practices owned and operated by Messrs Chaudhry and Ibrahim, the Engadine Practice in particular. Dr Kyatt offered to buy a 51% interest in the Engadine Practice and considered it was important for him to have a majority interest in that business and that he would handle the day-to-day management of it.

33. On 30 October 2017 at 11:52pm, Mr Chaudhry sent an email to Rizwan Inayat (an accountant for Dr Kyatt who attended a meeting on 28 October 2017 between Dr Kyatt, Mr Chaudhry and Mr Ibrahim), copied to Dr Kyatt, Mr Ibrahim and Imran Khan (the solicitor for Messrs Chaudhry and Ibrahim). Mr Chaudhry’s email forwarded (and expressed approval in answer to) an email sent earlier that evening at 6:46pm by Mr Inayat, which stated that Dr Kyatt, Mr Chaudhry and Mr Ibrahim contemplated having a shareholders agreement with the following main points:

1. Dr Kyatt would be in full control of the day-to-day management of the business of the Engadine Practice and make all decisions from a management and strategic point of view with respect to it.

2. Dr Kyatt would not receive any “management fees” in relation to managing the business.

3. Dr Kyatt, when called upon to provide his services as a radiologist, would charge based on what a normal radiologist charges.

4. Mr Chaudhry would work in the Engadine Practice and earn a salary based on his then existing rate.

5. In the event that Mr Chaudhry and/or Mr Ibrahim decided to sell their shares in the Engadine Practice, Dr Kyatt would have the first right to purchase those shares, and if Dr Kyatt determined not to exercise that option, Mr Chaudhry and Mr Ibrahim would be entitled to sell their shares to any passive investor.

6. In the event that Dr Kyatt decided to sell his shares in the Engadine Practice, both Mr Chaudhry and Mr Ibrahim would have the first right to purchase those shares, and if Mr Chaudhry and Mr Ibrahim determined not to exercise that option, Dr Kyatt would be entitled to sell his shares to anyone.

7. Shares in the Engadine Practice would be sold at market value based on market valuation undertaken by an independent valuer.

8. The person selling their shares would be responsible for paying the valuer and any legal fees associated with the sale of their shares.

9. Dr Kyatt would be the sole director of the new company through which the Engadine Practice would run.

10. Messrs Chaudhry and Ibrahim would have full access to the new company’s financial records and accounts.

34. This corporate structure did not proceed and no shareholders agreement was ever entered into between Dr Kyatt, Mr Chaudhry and Mr Ibrahim. Dr Kyatt confirmed this in cross-examination (T135–136). Several of the themes concerning Dr Kyatt having full control of the Engadine Practice which were raised in this email did, however, find their way into the structure which was ultimately adopted by Dr Kyatt, Mr Chaudhry and Mr Ibrahim. I will now turn to that structure.

35. Dr Kyatt gave evidence in cross-examination (T63 and T70) that Mr Inayat commenced to be his personal accountant in 2017 and has remained his personal accountant since then.

Engadine Imaging Trust

36. In about early February 2018, after lengthy negotiations, Dr Kyatt had a meeting with Mr Chaudhry and Mr Ibrahim in which Dr Kyatt said he was prepared to pay $319,000 for a majority stake in the Engadine Practice, saying that he would like a 51% interest in it and ultimate control of the company. Each of Mr Chaudhry and Mr Ibrahim agreed.

37. On 1 February 2018, the Engadine Imaging Trust (a unit trust) was created, pursuant to a deed (Engadine Trust Deed) executed between Advanced Imaging as trustee for the Kyatt Family Trust, Chaudhry Radiology Services Pty Ltd as trustee for the Nabeel Chaudhry Family Trust, MI No. 2 Family Pty Ltd as trustee for the MI No. 2 Family Trust (an entity associated with Mr Ibrahim) and EMIS.

38. The Engadine Trust Deed, which provided that EMIS would be trustee of the Engadine Imaging Trust, was executed by Dr Kyatt, Mr Chaudhry and Mr Ibrahim, on behalf of their respective unit holders of a total of 100 units in the Engadine Imaging Trust, as follows:

1. Dr Kyatt as director of Advanced Imaging, which would hold 51 units as trustee for the Kyatt Family Trust;

2. Mr Chaudhry as director of Chaudhry Radiology Services, which would hold 19 units as trustee for the Nabeel Chaudhry Family Trust; and

3. Mr Ibrahim as director of MI No. 2, which would hold 30 units as trustee for the MI No. 2 Family Trust.

39. The Engadine Trust Deed was also executed by Dr Kyatt on behalf of EMIS as its director and secretary.

40. Under the Engadine Trust Deed, EMIS had the power to institute, set up and administer the Engadine Practice, being the radiology practice known as Engadine Imaging (cl 21.1(a)). The “business” was defined in the Engadine Trust Deed as the radiology practice situated at the Engadine Premises or such other location as agreed by EMIS (cl 1.1(b)).

41. The Engadine Trust Deed also provides that there is no relationship of principal and agent between EMIS and the unit holders, no relationship of partners as between EMIS and the unit holders and no relationship of partners as between the unit holders amongst themselves (cl 19.1). In addition, the Engadine Trust Deed provides that no unit holder is under any obligation to personally indemnify EMIS or any creditor of EMIS in the event of there being any deficiency of the assets of the Engadine Imaging Trust as compared to its liabilities (cl 19.2).

42. Clause 13.2 of the Engadine Trust Deed provides that unit holders may inspect the financial statements and books of account in relation to the Engadine Imaging Trust.

43. The Engadine Trust Deed expressly provides that control and management of the Engadine Practice is the responsibility of the majority unit holder, Advanced Imaging, and contains particular provisions which establish the special position of Advanced Imaging in control of the Engadine Practice.

44. The relevant terms of the Engadine Trust Deed are bespoke in this regard, providing particular rights in favour of Advanced Imaging (which were not given to the entities controlled by Messrs Chaudhry and Ibrahim) as follows:

1. There is a prohibition of the transfer of any units by a unit holder other than by first right of refusal to the remaining unit holders on terms to be agreed and, if agreement cannot be reached, there is the right to sell to any party of their choosing except for Chaudhry Radiology Services or MI No. 2 who may only sell to a passive investor not involved in the operation or running of the business (cll 8.1, 8.2 and 8.3). This meant that Advanced Imaging could sell to a unit holder involved in the operation or running of the business.

2. The unit holders are presently entitled to the income of the Engadine Imaging Trust in proportion to their units, and while ever Advanced Imaging remains a unit holder, the timing and payment of any income distribution during a particular financial year is entirely at Advanced Imaging’s decision (cl 10.3(a)).

3. Advanced Imaging as the 51% unit holder may unilaterally require an auditor to be appointed to examine the accounts of the Engadine Imaging Trust, ascertain the correctness of any financial statement of the Engadine Imaging Trust or make inquiry into the financial affairs of the Engadine Imaging Trust (cl 13.3(a)).

4. Advanced Imaging as the 51% unit holder has the right to approve the remuneration for EMIS’s services (cl 17.2).

5. While ever Advanced Imaging is a unit holder, it has the right to nominate a representative who shall have 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, without any monetary restrictions, but without any additional recompense (cl 17.5(a)).

6. If Advanced Imaging is no longer a unit holder, EMIS can exercise discretions or powers by majority resolution of its board (cl 17.5(b)(i)).

7. EMIS must convene a meeting of unit holders if required to do so by Advanced Imaging as the holder of 51% of the units (cl 18.1(b)).

8. A poll may be demanded by Advanced Imaging as a holder of not less than 51% of the units entitled to vote at meetings of the unit holders (cl 18.5).

45. Dr Kyatt agreed in cross-examination that he acquired 51% of the units because he wanted to have control of the business of the Engadine Imaging Trust and the Engadine Practice and that he was intent on managing it (T136–137).

46. On 12 February 2018, Dr Kyatt paid $319,218.91 to Mr Ibrahim to acquire a 51% controlling interest in the Engadine Practice on behalf of Advanced Imaging. Given that this was an arms-length transaction, this placed the value of the Engadine Practice as at 12 February 2018 at $625,919.43.

47. At that time, through Dr Kyatt’s position as the sole director of each of Advanced Imaging and EMIS, Advanced Imaging’s sole shareholding in EMIS, Advanced Imaging’s 51% unit holding in the Engadine Imaging Trust and its rights under the Engadine Trust Deed, Dr Kyatt took over the total control of the day-to-day management of the Engadine Practice and assumed the capacity to make all decisions in relation to it.

48. Upon taking over the total control of the day-to-day management of the Engadine Practice in February 2018, Dr Kyatt made numerous changes to the Engadine Practice in an attempt to make it profitable, including:

1. deciding to acquire radiology machines under a hire–purchase arrangement, including a new CT scanner and two ultrasound machines;

2. undertaking the reporting and procedures for patients himself;

3. improving the services provided to the patients and building good relationships with the patients and the doctor referrers in the area;

4. acquiring a server and efficient software for images and for generating reports; and

5. building a team of staff around him.

49. By contrast, in February 2018, Mr Ibrahim went from being the sole director, manager and shareholder of AMIS (the company previously operating the Engadine Practice) to being a director of a minority unit holder of the Engadine Imaging Trust which beneficially owned the Engadine Practice. From February 2018, Mr Ibrahim had no power to manage the Engadine Practice 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 Engadine Practice. Mr Ibrahim was a director of MI No. 2, which held 30% of the units in the Engadine Imaging Trust as trustee for the MI No. 2 Family Trust.

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

50. On 22 February 2018, Mr Inayat sent an email to All Star Property Group, the managing agent for the lessor of the Engadine Premises, introducing himself and stating that he acted as the accountant for EMIS and was responsible for all the payments. In the email, Mr Inayat asked that all correspondence be sent to his email address and also provided his mobile number.

51. On 23 February 2018, Nicole Hartnett of All Star Property Group replied by email to Mr Inayat stating that she had updated their system to include him as the main contact in relation to the Lease.

50. In February 2018, the Engadine Premises were transferred from Peter and Robyn Thompson to new owners, Don and Helen Zafiropoulos, who bought the Engadine Premises subject to the Lease.

51. In May 2018, Pulse Medical assigned the Lease of the Engadine Premises to EMIS.

52. At all relevant times, the Engadine Practice traded from the Engadine Premises.

Establishing the Dapto Practice

55. In September 2018, Dr Kyatt, Messrs Ibrahim and Chaudhry and Dr Haider Jasim (a general practitioner) had discussions about establishing a radiology practice in Dapto. Those exchanges took place at least in part via WhatsApp messaging and email. Among the matters discussed was the presence of an existing radiology practice in Dapto.

56. In late September 2018, Dr Kyatt, Messrs Ibrahim and Chaudhry, and Dr Jasim exchanged WhatsApp messages in the course of which:

1. Mr Chaudhry suggested that they should directly approach the staff at the existing radiology practice in Dapto and offer them contracts, saying ‘[t]his way we will close them down”;

2. Mr Ibrahim agreed, stating “[w]e have to close them down and the only way to do that is through their staff”;

3. Dr Jasim agreed, saying “[y]es it should be done ASAP currently they are struggling with staff to keep the unit going!! I am watching them carefully and closely, we should close them off soon”; and

4. Dr Kyatt indicated that he had obtained advice from someone called “Terry” (who is referred to only by his first name), who advised him to advertise roles at the Dapto Practice and “not to approach the staff directly”.

57. On 25 September 2018, Mr Chaudhry sent an email to Dr Kyatt, Mr Ibrahim and Dr Jasim, attached to which was a spreadsheet setting out the prospective pay rates and total expense of hiring six members of staff from the existing practice in Dapto. In the body of the email, Mr Chaudhry stated:

… I have attached the expense that will occur by taking the dapto staff.

I believe by taking the staff, it will cripple Dapto and they will not be able to operate.

58. One of the members of the staff in the existing practice in Dapto listed on the spreadsheet was “Danielle Coles” (her correct first name is “Dannielle”).

2019 financial position of EMIS

59. On 6 February 2019, Mr Inayat sent an email to Dr Kyatt, Mr Ibrahim and Mr Chaudhry in which he said there was a fair bit of money in Engadine and he was proposing that $50,000 be taken out as profit share. Mr Inayat said that he would transfer the $50,000 according to the percentage of units held by each unitholder and asked for them to confirm their bank account details.

60. On 19 April 2019, Mr Inayat sent an email to Dr Kyatt, Mr Ibrahim and Mr Chaudhry in which he said there was quite a fair bit of money sitting in the Engadine account so they had decided to take a $150,000 profit share. Mr Inayat said that because Dr Kyatt had 51% of the shares he would take $76,500 as profit share. Mr Inayat said that each of Mr Ibrahim and Mr Chaudhry should take out their share based on the percentage of shares they had in the business.

61. The financial statements for EMIS for the year ending 30 June 2019 show that the total income was $1,505,173.49 and total expenses were $1,561,054.14 (including a consulting fee of $136,363.64), making the net loss of $55,880.65. Those financial statements also demonstrate that there was a total equity deficiency of $61,119.40. Dr Kyatt saw these financial statements at the end of that financial year (T85).

62. The plaintiffs submit that despite the recording of a net loss, the financial statements for the year ending 30 June 2019 reveal that the Engadine Practice was profitable because the unit holders took out their profit share in the form of the consulting fee of $136,363.64 which, when added back to the net loss of $55,880.65, reveals a net profit of $80,482.99. They also say that Dr Kyatt’s 51% share of the consultancy fee was $69,545.46.

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

63. In mid-2019, some time prior to July 2019, Dr Kyatt informed Mr Chaudhry that he was relocating overseas. Although the evidence shows that Dr Kyatt had mentioned a proposed relocation overseas during discussions in November 2015 with Messrs Ibrahim and Chaudhry about an earlier business negotiation, Dr Kyatt did not tell Mr Ibrahim or Mr Chaudhry of his intention to leave for Jordan any earlier than mid-2019 and it came as a surprise to them (T137–138).

64. On 24 July 2019, Dr Kyatt, Dr Jasim, Mr Chaudhry, Mr Ibrahim and Roz Rhoden (the Business Development Manager of Southern Imaging Group) held a meeting at the Novotel at which a number of issues were discussed. The minutes of the meeting were taken by Ms Roden and then emailed by her to all of the other participants on 5 August 2019.

65. In the minutes of the meeting, Mr Ibrahim is recorded as discussing with Dr Kyatt:

… if the Engadine rooms need to expand and there is a shop for lease 3 doors down from the current site. This will allow for future growth as they are outgrowing the current site.

66. Below this entry, the minutes record “Dr Kyatt considering”.

67. The minutes of the meeting also state:

Discussion: who will be in control when Dr Kyatt goes away

No response or decision made.

Dr Kyatt would like to put forward Dr Jasim as a director (for internal communication and management only)

68. The minutes also contain a record of discussion about issues concerning the Dapto Practice and the Warrawong Practice, such as whether an MRI machine and a 3D mammogram machine should be purchased for the Dapto Practice, the anticipated arrival of a bone density machine that had been ordered, whether a female radiologist should be offered shares in the various practices, whether Dr Kyatt and Dr Jasim wished to buy into the practices at Woonona and Warilla and various staffing issues such as the hiring of a marketer and an operational manager.

69. On 26 September 2019, Mr Chaudhry was appointed as a second director and secretary of EMIS. Dr Kyatt remained a director and secretary of EMIS.

70. In October 2019, Dr Kyatt moved from Sydney to Jordan for family reasons. Dr Kyatt had access to the Engadine Practice bank account and could monitor the financial performance of the Engadine Practice to the extent it was disclosed in the bank account statements. Dr Kyatt also communicated frequently with Mr Inayat as his own accountant and the accountant for EMIS. Over the following month, Dr Kyatt continued to provide reporting services remotely to the Engadine Practice.

71. In cross-examination (T58–62), Dr Kyatt stated that after he moved to Jordan, he provided radiology services remotely to independent radiology practices located in Australia, being IDXT (since October 2019) and I-MED (since April 2021). Dr Kyatt’s best estimate is that since late 2019 he has worked for IDXT and continues to do so. Dr Kyatt’s best estimate is that he has worked for IDXT for between six and eight hours per day for five or six days each week. Also in cross-examination (T69), Dr Kyatt said that he did not provide any services to any medical practitioners or sonographers in Jordan.

72. After Dr Kyatt relocated to Jordan in October 2019, Mr Chaudhry took over management of the Engadine Practice and assumed primary responsibility for the Engadine Practice’s day-to-day operations. This included Mr Chaudhry having unrestricted access to the books and records of the Engadine Practice.

73. On 28 October 2019, Mr Chaudhry sent an email to Dr Kyatt reporting that the Engadine Practice, as well as the Lakemba Practice and the Dapto Practice, had been doing well since Dr Kyatt had gone and the revenues at all sites were good with no real drop.

74. On 17 November 2019, Dr Kyatt sent a WhatsApp message to Mr Chaudhry informing him that he would cease to do any further reporting at all for the practices, including the Engadine Practice, saying:

Sorry I need to stop my telereporting because I found it doesn’t worth the effort. Doing these cases the way I am doing them is a mission, demanding time and effort and taking precious family time. At the end of the day I found what I get in a month I can make in a couple of days doing locum and there are so many positions in Australia instead of sitting 3–4 hours every day doing these cases.

75. On the same day, Mr Chaudhry responded “no problems”.

76. Dr Kyatt was cross-examined about the messages he sent to Mr Chaudhry informing him that he was stopping work for all of the practices (T131–134). In light of the views that I have formed about the credibility of Dr Kyatt as a witness, I consider that he stopped doing work for the Engadine Practice and the other practices because he considered that he would be paid more money doing work for IDXT, not because he thought that he would be endangering lives if he continued to do that work (as he claimed in cross-examination). The primary reason he gave to Mr Chaudhry in his message was one relating to money, not any other cause concerning patient care which would have been very simple and powerful for him to say if it was the true reason.

Pay rise approved for Dannielle Coles

77. On 7 February 2020, Dannielle Coles sent an email to Mr Chaudhry requesting a pay rise due to her job role and working hours increasing.

78. On 11 February 2020, Mr Chaudhry sent an email to Dr Kyatt, Mr Ibrahim and Ms Rhoden, forwarding Ms Coles’ email of 7 February 2020 and expressing his approval to give Ms Coles a pay rise, stating “she is a massive asset to the company”.

79. On 14 February 2020, Ms Rhoden (signing off as Business Development Manager, Southern Imaging Group) responded by email to Mr Chaudhry, copied to Dr Kyatt and Mr Ibrahim, agreeing to the proposed pay rise for Ms Coles.

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

80. On 12 March 2020, Mr Ibrahim sent an email to Mr Inayat, the accountant for EMIS, requesting access to the Xero (accounting software) account for the Engadine Practice. Mr Inayat subsequently sent Mr Ibrahim a Xero invitation.

81. From this time, Mr Ibrahim had unrestricted access to the books and records of the Engadine Practice.

2020 financial position of EMIS

82. On 1 March 2020, Mr Inayat sent an email to Dr Kyatt, Mr Chaudhry and Mr Ibrahim saying that he had had a chat with Dr Kyatt on the weekend and since there was $150,000 sitting in Engadine they thought it would be a good idea to take some money out as a profit share. Mr Inayat said that they were thinking of taking out $100,000, Dr Kyatt would take out $51,000 and the remainder could be taken out by each of Mr Chaudhry and Mr Ibrahim based on their percentages.

83. On 12 March 2020, Mr Inayat sent an email to Dr Kyatt, Mr Chaudhry and Mr Ibrahim saying that the money that Dr Kyatt had withdrawn would be classified as a consulting fee for radiology work and expensed in the accounts for EMIS and that the profit share to be taken out by each of Mr Ibrahim and Mr Chaudhry would also get classified as a consulting fee in the books of EMIS.

84. The financial statements for EMIS for the year ending 30 June 2020 show that the total income was $1,407,461.30 and total expenses were $1,429,435.88 (including a consulting fee of $240,909.09), making the net loss of $21,974.58. Those financial statements also demonstrate that there was a total equity deficiency of $83,093.98. Dr Kyatt saw these financial statements at the end of that financial year (T85).

85. The plaintiffs submit that despite the recording of a net loss, the financial statements for the year ending 30 June 2020 demonstrate that the Engadine Practice was profitable because the unit holders took out their profit share in the form of the consulting fee of $240,909.00 which, when added back to the net loss of $21,974.58, reveals a net profit of $218,934.42. They also say that Dr Kyatt’s 51% share of the consultancy fee was $122,863.59.

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

86. On 22 June 2020 and 5 August 2020, Mr Inayat sent emails to Messrs Ibrahim and Chaudhry and Dr Kyatt concerning the proposed deferral and/or waiver of rental payments for the Engadine Premises from the lessor during the COVID-19 pandemic, with the lessor chasing the rent for the Engadine Premises and offering a 10% waiver of the rent for two months and Mr Inayat planning to go back with a 20% waiver for 6 months starting in April 2020. On 5 August 2020, each of Messrs Chaudhry and Ibrahim sent an email to Mr Inayat asking him to negotiate the waiver.

87. I infer from this exchange that each of Messrs Chaudhry and Ibrahim were involved in a decision concerning the rent paid by EMIS for the Engadine Premises under the Lease.

Dr Kyatt’s employment at I-MED

88. On 14 April 2021, Dr Kyatt and Mr Chaudhry had the following exchange over WhatsApp:

Dr Kyatt:   Salam nabeel

Sorry I just started a new job for imed and currently very busy.

Mr Chaudhry:   Salam Ali, no problems

89. In cross-examination (T60–62), Dr Kyatt said that he commenced providing remote radiology services to I-MED in April 2021, which he estimated he did for about one year, involving him working three to four hours a day, maybe two to three shifts a week. Dr Kyatt said that I-MED is the largest radiology practice in Australia and the cases he reported on came from all over Australia, other than Sydney and Wollongong.

Distribution of funds from the Engadine Practice

90. 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.

91. There is no evidence of what, if any, action was taken in response to this suggestion by Mr Ibrahim. In any event, the distribution of the income of the Engadine Imaging Trust was entirely the decision of Advanced Imaging under cl 10.3(a) of the Engadine Trust Deed and not something over which Mr Ibrahim had any control.

Termination of employment of staff member at the Engadine Practice

92. On 2 May 2021, Mr Ibrahim sent an email with an attached letter to Jong Min Son, an employee of the Engadine Practice, copied to Mr Chaudhry. That letter, on the letterhead of Pulse Medical Imaging, concerned the termination of Jong Min Son’s employment with the Engadine Practice.

93. Under the heading ‘Termination of Your Employment’, the text of the letter relevantly stated:

Dear Mr Jong Min Son,

I am writing to you concerning the termination of your employment with Engadine Medical Imaging.

Your employment is being terminated due to serious misconduct due to the following two incidents:

[The letter then set out factual matters concerning a patient receiving the wrong procedure and Jong Min Son going home early]

The incidents as mentioned above constitute a serious and imminent risk to the health and safety of our patients, in addition to risking the reputation and viability of the business.

Your termination is effective immediately as of today’s date …

…

Yours sincerely

Mena Ibrahim

94. I infer that Mr Ibrahim had to investigate and establish what had taken place before sending the notice of termination. There is no evidence that Mr Ibrahim consulted with either Dr Kyatt or Mr Chaudhry before taking the step of terminating the employment of Jong Min Son, although I infer from the copying in of Mr Chaudhry to the email that the termination did not come as a surprise to him.

95. There is evidence that on 2 September 2022 the original recipient of the email, Jong Min Son, forwarded to Dr Kyatt the email of 2 May 2021.

2021 financial position of EMIS

96. The financial statements for EMIS for the year ending 30 June 2021 show that the total income was $1,591,392.57 and total expenses were $1,559,148.99 (including a consulting fee of $450,000), making the net profit of $32,243.58. Those financial statements also demonstrate that there was a total equity deficiency of $50,850.40. Dr Kyatt saw these financial statements at the end of that financial year (T85).

97. The plaintiffs submit that despite the recording of the small net profit, the financial statements for the year ending 30 June 2021 demonstrate that the Engadine Practice was more profitable that it appears because the unit holders took out their profit share in the form of the consulting fee of $450,000.00 which, when added back to the net profit of $32,243.58, shows a greater net profit of $482,243.58. They also say that Dr Kyatt’s 51% share of the consultancy fee was $229,500.00.

Attempts to renew the Lease

98. On 17 August 2021 at 1:39pm, Mr Chaudhry sent an email to Paula Milsted, the Property Administrator of All Star Property Group, asking for an update on the time remaining for the Lease in respect of the Engadine Premises.

99. On 17 August 2021 at 2:00pm, Ms Milsted sent an email to Mr Chaudhry in reply, stating that the Lease was due to expire on 31 January 2022.

100. On 17 August 2021 at 9:35pm, Mr Chaudhry forwarded Ms Milsted’s response to Mr Ibrahim, asking Mr Ibrahim what he wanted Mr Chaudhry to reply with.

101. On 18 August 2021 at 12:01pm, Mr Ibrahim emailed Mr Chaudhry with a draft response to Ms Milsted in the following form:

Hi Paula,

Please advise the landlord that I would like to enter into a 5+4+4+4 year lease from 31 January 2022.

I will pay the landlord’s legal fees for preparing the new lease.

Thank you.

102. On 18 August 2021 at 12:10pm, Mr Chaudhry sent an email to Ms Milsted in the precise form of the draft suggested by Mr Ibrahim.

103. On 18 August 2021 at 12:42pm, Ms Milsted replied to Mr Chaudhry, stating that she would pass on his correspondence to the lessors and would be in touch with the suggested terms in the future.

104. On 8 September 2021, Ms Milsted sent an email to one of the lessors of the Engadine Premises, Don Zafiropoulos, in the following form:

Lease to Engadine Medical Imaging Services Pty Ltd

Premises: Suite 3, 24 Station Street, Engadine NSW

Lease Expiry: 31.01.2021

We refer you to the above tenant who has advised they would like to renew their lease for a term of five years with 3 x 4 year options.

We have reviewed the rent and [propose] the following

Lease commencement

1 February 2022

Term

Five (5) years

Option

3 x 4 year options

Commencement Rent

$63,621.96 per annum PLUS GST / $5,301.83 per month PLUS GST

Rent Reviews

Annually at anniversary via CPI/4% greater of Market Review at Option

Outgoings

100% as per existing lease

- Council

- Water Rates

- Tax’s

- Strata levis /fees

Security Deposit

$15,248.97 – held by yourself

A top amount of $2,247.06 will be required

Lease Preparation Cost

Payable by the lessee as charged by the appointed solicitor.

If you are in agreement to the above, you may simply reply back to this email, we will then advise the tenant of the [proposed] new rent and request your solicitor prepare the necessary lease agreement.

If how however [sic] you wish to discuss please do not hesitate to contact our office.

Could you please confirm your solicitors details.

105. On 13 October 2021, Abbey Freeman (the Leasing Administrator of All Star Property Group) sent an email to Mr Inayat noting that the Lease for the Engadine Premises was due to expire on 31 January 2022 and asking whether he intended to renew the Lease or continue to occupy the Engadine Premises and if so, what length of lease he was interested in securing with the lessors. Ms Freeman concluded by asking Mr Inayat to provide a prompt reply, as if he did not wish to renew they would need to market the Engadine Premises to secure a replacement tenant for the lessors.

106. On 14 October 2021 at 8:18am, Mr Inayat forwarded Ms Freeman’s email of 13 October 2021 to Mr Chaudhry, Mr Ibrahim and Dr Kyatt, saying:

Guys

Please refer below lease renewal for Engadine

107. On 14 October 2021 at 8:20am, Mr Inayat sent an email responding to Ms Freeman, stating that his firm acted as the accountants, he had passed on her email to the client, and that he would ensure that they would get back to her as soon as possible.

107. Also on 14 October 2021 at 8:20am, Mr Inayat sent an email to Dr Kyatt asking if he wanted to discuss the Lease renewal further and suggesting that Dr Kyatt speak with Mr Chaudhry to discuss the terms of renewal. On the same day at 5:36pm, Dr Kyatt sent an email in reply to Mr Inayat stating:

Yes, Rizwan for me certainly. Just see what others’ ideas.

109. On 31 October 2021, the period within which the option to renew the Lease of the Engadine Premises could be exercised expired.

110. On 25 November 2021 at 3:27pm, Mr Chaudhry sent an email to Mr Inayat, in reply to Mr Inayat’s email of 14 October 2021 at 8:18pm forwarding Ms Freeman’s email of 13 October 2021. In that email, Mr Chaudhry said:

Salam Bro,

Did you send an email to renew the lease?

Lets [sic] do a 4 x 4 x 4 x 4 year lease.

111. On 25 November 2021 at 3:46pm, Mr Inayat then sent the following email to Ms Freeman, copied to Mr Chaudhry:

Abbey

Hope you are well.

We would like to renew the lease ca [sic] we renew as follows:

4 x 4 x 4 x 4 lease.

112. I infer that Mr Inayat sent this email after speaking to Mr Chaudhry and receiving instructions to take steps to renew the Lease.

113. Dr Kyatt said in evidence that from this email, he understood that Messrs Chaudhry and Ibrahim had agreed to the renewal of the Lease and that it would be renewed. But the email, on its face, was not sent or copied to Dr Kyatt, and he did not give evidence that he spoke to Mr Inayat about the issue so the correctness of his evidence may be doubted.

114. I infer from this email that at that time, Mr Chaudhry would have believed that the Lease would be renewed, having directed Mr Inayat to inform the agent of that request and having seen that Mr Inayat had done as he instructed.

115. On 31 January 2022, the Lease expired in accordance with its terms and EMIS became a month-to-month tenant of the Engadine Premises.

116. On 23 February 2022 at 7:05pm, Mr Ibrahim sent an email to Mr Chaudhry, being an email that Mr Ibrahim proposed to send to All Star Property Group concerning the Lease. That email, addressed to Ms Freeman, was in the following terms:

Dear Abbey,

As you are aware, our lease with [the lessors] for [the Engadine Premises] expired on 31/01/2022.

I had a meeting with [Mr Zafiropoulos] in 2017 just before he purchased the premises … and I am sure he will have no issue continuing our relationship and entering into a brand new lease with the following:

1. 5x5x5x5 years;

2. Same terms as in 2017;

3. Entity will be LOGAN MEDICAL IMAGING PTY LTD.

Please have the new lease and all correspondence sent to our Solicitor Jabran Chaudhry [...] as Rizwan Inayat is no longer the account [sic] for the company.

Thank you.

117. The reference to “our lease” and “our relationship” in the draft email can only be to the Lease then held by EMIS (which had become month-to-month) and the relationship between EMIS and one of the lessors, Mr Zafiropoulos.

118. On 23 February 2022 at 7:24pm, Mr Chaudhry replied to Mr Ibrahim via email, saying “[p]erfect” and directing him to also copy the email to the email address used by Ms Milsted.

119. On 25 February 2022 at 12.00pm, Mr Ibrahim sent an email to Ms Freeman and Ms Milsted in substantially the same form as his proposed draft of 23 February 2022, with the final line reading ‘Rizwan Inayat is no longer the account [sic] for the company as such do not send him any correspondence.’ This email was copied to Mr Chaudhry and Jabran Chaudhry and attached the original Lease agreement as a pdf document. Tellingly, it was not copied to Dr Kyatt.

120. The evidence before me is that the new lessee proposed by Mr Ibrahim, Logan Medical Imaging Pty Ltd, is an entity of which Messrs Ibrahim and Chaudhry are the directors and equal shareholders. There is no evidence that Mr Inayat had ceased to be the accountant for EMIS at this time. In fact, the contemporaneous documents during 2022 suggest that Mr Inayat remained the accountant for EMIS. I find that the statement in the email that Mr Inayat had ceased to be the accountant was false and that the statement that Mr Inayat should not be sent any correspondence by All Star Property Group was said to ensure that it did not come to Mr Inayat’s notice that an attempt was being made to renew the Lease for the Engadine Premises in the name of Logan Medical Imaging.

121. On 28 February 2022 at 12:32pm, Ms Milsted sent an email to Mr Zafiropoulos as lessor of the Engadine Premises informing him that the tenant of the Engadine Premises, Mr Ibrahim, had contacted the agents regarding the Lease and had indicated that he wished to ‘scrap’ what had previously been done and have a new lease put in place. In her email, Ms Milsted noted that Mr Ibrahim had requested the following changes:

Requested Changes

Entity

Logan Medical Imaging Pty Ltd

ABN

30 622 606 848

Term

Five (5) Years

Option

3 x Five (5) years

Guarantor

Mena Ibrahim

22 Burlington Street

MONTEREY NSW 2217

Tenants Solicitors Details

Jabran Chaudry

Adiuvo Legal

Level 8, 65 York Street,

SYDNEY NSW 2000

Email: [email protected]

PH: [phone]

122. I infer from the matters contained in Ms Milsted’s email of 12:32pm that between 12:00pm and 12:32pm, Mr Ibrahim spoke to Ms Milsted to provide her with additional details about the proposed terms of the new lease.

123. On 28 February 2022 at 4:40pm, the lawyers for the lessors of the Engadine Premises, GA Lawyers, sent an email to Ms Milsted confirming that Mr Zafiropoulos had instructed them to prepare the new lease document and asking her to confirm what the rent was prior to 1 February 2022 and what the rent increased to on 1 February.

124. On 14 March 2022, GA Lawyers sent Ms Milsted a draft of the new lease with a commencing date of 1 February 2022, a terminating date of 31 January 2026 and 3 x 4 year option periods, which named Logan Medical Imaging as the lessee, Mr Ibrahim as the guarantor, and provided for Messrs Ibrahim and Chaudhry as the directors of Logan Medical Imaging to sign on the execution page.

125. For reasons not disclosed by the evidence, this proposed leasing transaction did not proceed.

Incorporation of Engadine Medical Imaging

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

Focus Radiology rebranding

127. 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.

128. Ms Coles is a former staff member at the previous Dapto radiology practice, who appears to have commenced employment either with the Dapto Practice upon its establishment jointly by Mr Ibrahim, Mr Chaudhry, Dr Kyatt and Dr Jasim, or with one or more associated entities controlled by Mr Chaudhry and/or Mr Ibrahim and forming part of SIG. Before the change to Focus Radiology, her email address was [email protected] and her email sign off was:

Dannielle Coles

Southern Imaging Group

Pulse Medical Imaging

129. On 30 May 2022, Ms Coles sent an email to Chris Germon, a consultant at Crowd IT, copied to Mr Chaudhry, in which she requested that the following, among other items, be actioned by the end of July 2022:

1. new email accounts created for each of the Woonona Practice, the Warrawong Practice, the Warilla Practice, the Dapto Practice and the Engadine Practice, in the form ‘[suburb name]@focusrad.com.au’;

2. new staff email accounts created for herself and Mr Chaudhry;

3. new website URL ( to be confirmed and created; and

4. the telephone introduction and out-of-hours messages for each of the practices to be amended to refer to Focus Radiology.

130. Throughout June 2022 and into July 2022, Ms Coles had further email correspondence in connection with the rebranding process with Mr Germon of Crowd IT to find out how it was progressing, as well as with professional design and printing services engaged to design and/or supply, inter alia, Focus Radiology letterheads, appointment cards, business cards, referrals, marketing folders, film bags, and signage, including a Focus Radiology logo sign above the entrance to the Engadine Premises and a Focus Radiology logo lightbox to be hung from the awning outside the Engadine Premises. Mr Chaudhry was copied in to most of this correspondence.

131. On 15 June 2022, Mr Chaudhry registered the business name ‘Focus Radiology’. Also on this date, Mr Chaudhry incorporated Focus Radiology Warrawong and Focus Radiology Dapto, with Mr Chaudhry as the sole director, secretary and shareholder of both companies.

132. An ASIC search of the business name ‘Focus Radiology’ reveals that:

1. Focus Radiology is related to the Trustee for the Warrawong Diagnostic Imaging Trust, an entity of which Mr Chaudhry is named as associate; and

2. Focus Radiology’s principal place of business is listed as an address in Haywards Bay NSW 2530, a property which Mr Chaudhry and his wife Mehreen Nabeel Chaudhry own as joint tenants.

133. On 17 June 2022, the Dapto Practice was sold by Dapto Imaging Pty Ltd as trustee for the Dapto Medical Imaging Unit Trust to Focus Radiology Dapto Pty Ltd as trustee for the Focus Radiology Dapto Trust for $1 and the assumption of specified liabilities. Mr Ibrahim signed the contract on behalf of Dapto Imaging Pty Ltd and Mr Chaudhry signed on behalf of Focus Radiology Dapto Pty Ltd.

134. On 20 June 2022, the Warrawong Practice was sold by Warrawong Imaging Pty Ltd as trustee for the Warrawong Imaging Unit Trust to Focus Radiology Warrawong Pty Ltd as trustee for the Focus Radiology Warrawong Trust for $1 and the assumption of specified liabilities. Mr Ibrahim signed the contract on behalf of Dapto Imaging Pty Ltd and Mr Chaudhry signed on behalf of Focus Radiology Warrawong Pty Ltd. (It appears that the vendor name is incorrectly listed as ‘Dapto Imaging Pty Ltd’ on the execution page of this contract).

135. On 4 July 2022, Ms Coles and Mr Chaudhry exchanged emails about the proposed referral form for Focus Radiology, which included the details of the Engadine Practice at the address of the Engadine Premises with a map of its location.

136. On 9 July 2022, Ms Coles sent an email to Mr Germon seeking an update on the rebranding process and stipulating a deadline of 8 August 2022.

137. On 11 July 2022, Mia Coles, Focus Radiology’s Marketing Liaison Officer, sent an email to a number of physiotherapy, dental, podiatry and massage practices to announce the launch of Focus Radiology, relevantly stating:

This is a follow-up email to request a meeting with the Doctors and staff at your Clinic.

To introduce Focus Radiology (previously Southern Imaging Group and Pulse Medical Imaging), We would like to provide lunch for your doctors to introduce our new Clinical lead and Radiologist Dr Naushad Ahamed (Nash) who will be joining us full time from mid August, in our practices located in Engadine, Dapto, Warilla, Warrawong and Woonona.

…

New Lease of Engadine Premises and Dr Kyatt’s responses

138. On or about 7 July 2022, Engadine Medical Imaging entered into a lease for the Engadine Premises (New Lease). The circumstances in which that transaction occurred are not disclosed by the evidence. The New Lease itself is not in evidence.

139. On 12 July 2022 at 8:00pm, Mr Ibrahim sent a letter by email to Dr Kyatt and Mr Chaudhry. The letter was addressed to EMIS and stated the following (emphasis in original):

I write to you in relation to Engadine Medical Imaging Services Pty Ltd’s (herein referred to as Engadine Services) occupation at the premises of Suite 3, 24 Station Street, Engadine (the Premises).

I advise as follows:

1.   Engadine Medical Imaging Services Pty Ltd (Engadine Services) occupied the Premises pursuant to a Lease between Peter Anthony Thompson and Robyn Lesley Thompson and Pulse Medical Imaging Engadine Services Pty Ltd for a period of five (5) years commencing 1 February 2017 and expiring 31 January 2022 (as subsequently varied and transferred).

2.   Engadine Services has occupied the Premises on a monthly overholding basis since the expiry of the Lease.

3.   The managing agent, namely Paula Milsted of All Star Property Group, has written to each of you giving notice of the expiry of the Lease, seeking for you to exercise your option and renew the lease for an additional of five (5) year period.

4.   You have failed, neglected and/or refused to renew the Lease and/or enter into negotiations in respect of the continued tenure at the Premises.

5.   Engadine Medical Imaging Pty Ltd has been incorporated on 22 March 2022 to which I am sole Director and Secretary and has now entered into a Lease in respect of the Premises for a period of five (5) years, with further options.

You are hereby on notice that Engadine Services is required to vacate the Premises, relocate its business and its business assets to alternate premises within thirty (30) days from the date of this letter, namely by not later than 5.00pm, Wednesday 10 August 2022.

We require Engadine Services to take with it any of its plant and equipment, fixtures and fittings located within the Premises and leave the Premises in a clean and tidy condition. Any plant and equipment or property remaining at the Premises after the deadline specified above, will be considered abandoned and will be dealt with accordingly.

The fit out at the Premises is the property of the Landlord and accordingly, is required to remain.

No further payments of rent or outgoings are to be made and the Landlord has been directed to return any further payments purported to be made under the former monthly tenancy.

As a further and separate point, your failure, neglect or refusal to enter into discussions with the agent in relation to the renewed or continued tenure at the Premises constitutes, without limitation, a fundamental breach of your obligations as director of Engadine Services, having failed to act in the best interest of shareholders.

140. The letter was signed by Mr Ibrahim in his capacity as director of Engadine Medical Imaging.

141. On 12 July 2022 at 8:59pm, Mr Chaudhry replied by email to Mr Ibrahim, copying in Dr Kyatt, stating:

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!

142. On 12 July 2022 at 9:06pm, Mr Chaudhry sent an email to Mr Inayat and Dr Kyatt, forwarding Mr Ibrahim’s email and attached letter of that day and saying:

Rizwan, Mena has taken the Lease at Engadine!!

I thought the lease was renewed?

What are our options? We need to seek legal advise [sic] urgently!!

143. The fact that Mr Chaudhry was consulting with Mr Inayat in relation to the lease of the Engadine 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.

144. 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 plaintiffs 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 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.

145. Dr Kyatt was cross-examined at length about the significance to him of receiving Mr Ibrahim’s letter of 12 July 2022 (T98–99) as follows:

Q. … You understood, in at least July 2022, can I suggest, that this letter had been written by a company called Engadine Medical Imaging. Do you see that?

A. Yes.

Q. You understood, at least from July 2022, that that company was associated with Mr Ibrahim, is that right?

A. Yes.

Q. Not to put too fine a point on it, by this letter, Mr Ibrahim's company was demanding that the Engadine practice leave the property at Station Street, correct?

A. Yes.

Q. You must have appreciated, in July 2022, that Mr Ibrahim was associated with a company involved in the medical imaging business?

A. Yes.

Q. That you got that, can I suggest, from the Engadine Medical Imaging name, which we see at the top of page 1079?

A. Yes.

Q. That you must have understood that business was going to be competitive with the Engadine practice?

A. It's in the same premises, I cannot have called competitive.

Q. That's my point. On your understanding, in July 2022, it wanted to take over the premises at Station Street, Engadine, correct?

A. Yes.

Q. You must have understood, in July 2022, that it was doing so to run a competing business, correct?

A. No.

Q. Is that a serious answer?

A. He wants to take the business, not competing business.

Q. I see. You knew that, can I suggest to you, it was obvious in July 2022, that this company called Engadine Medical Imaging would be wanting to take over a business and run it in the place of the existing Engadine practice, correct?

A. Yes.

Q. Take over the premises and run the business in competition with the existing practice, correct?

A. There won't be competition.

Q. In none of your letters in July 2022 onwards, did you ever suggest through your lawyers that Mr Ibrahim was not allowed to run a competing business, did you?

A. There was no question of competing business.

Q. The focus of your concern from July 2022 onwards was to get back into the premises, correct?

A. Correct.

Q. Can I suggest to you, you never asked your lawyers to say to Mr Ibrahim that he wasn't entitled to engage in competitive business because he knew that he was allowed to?

A. Can you repeat that question?

Q. Of course. Can I suggest to you, in the second half of 2022, you never asked your lawyers to complain about Mr Ibrahim conducting a competing business because you knew that Mr Ibrahim was allowed to do so?

A. I wasn't under this idea or thought that he is allowed to. The way it was going, the negotiation, I had an impression he's going to give me the premises back early on …

146. In my assessment of this evidence, from the time at which Dr Kyatt received Mr Ibrahim’s letter of 12 July 2022 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. Dr Kyatt’s refusal to concede that this would or would not be a competing business relative to the Engadine Practice is of no importance. Dr Kyatt knew that from this time the Engadine Practice was at risk, due to the looming prospect of a practice that Mr Ibrahim wished to establish in place of it.

147. On 13 July 2022 at 10:49pm, Dr Kyatt sent an email to Ms Milsted of All Star Property Group in which he introduced himself as the majority shareholder and one of the directors of EMIS at the Engadine Premises. Dr Kyatt said he had received a letter from one of his partners (being Mr Ibrahim’s letter of 12 July 2022, which Dr Kyatt attached to his email) “claiming leasing” of the Engadine Premises and warning EMIS to vacate the Engadine Premises within 30 days. Dr Kyatt said that the letter had caused a huge shock and disturbance to everyone and the business and that he was currently seeking legal advice and action. Dr Kyatt said (grammatical errors left in place):

Statutory provisions

402. Sections 180, 181, 182 and 183 of the Corporations Act provide:

180   Care and diligence—civil obligation only

Care and diligence—directors and other officers

(1)   A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a)   were a director or officer of a corporation in the corporation’s circumstances; and

(b)   occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Business judgment rule

(2)   A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

(a)   make the judgment in good faith for a proper purpose; and

(b)   do not have a material personal interest in the subject matter of the judgment; and

(c)   inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

(d)   rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

Note:   This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Act or under any other laws.

(3)   In this section:

business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

181   Good faith—civil obligations

Good faith—directors and other officers

(1)   A director or other officer of a corporation must exercise their powers and discharge their duties:

(a)   in good faith in the best interests of the corporation; and

(b)   for a proper purpose.

(2)   A person who is involved in a contravention of subsection (1) contravenes this subsection.

182   Use of position—civil obligations

Use of position—directors, other officers and employees

(1)   A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)   gain an advantage for themselves or someone else; or

(b)   cause detriment to the corporation.

(2)   A person who is involved in a contravention of subsection (1) contravenes this subsection.

183   Use of information—civil obligations

Use of information—directors, other officers and employees

(1)   A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)   gain an advantage for themselves or someone else; or

(b)   cause detriment to the corporation.

(2)   A person who is involved in a contravention of subsection (1) contravenes this subsection.

Authorities

403. In Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789, Black J at [408]–[409] set out the applicable principles for an alleged contravention of s 180 of the Corporations Act as follows:

[408]   … In Australian Securities Commission v Gallagher above at 52-53, Pidgeon J observed that the test whether the statutory duty of care and diligence had been contravened was an objective one, that a director need not exhibit a greater degree of skill in the performance of his or her duties than may reasonably be expected for a person of his or her knowledge and experience, in the relevant circumstances, and that it was relevant to consider the way in which the work of the company was distributed between its directors and other officers, provided that distribution was reasonable. In Australian Securities and Investments Commission v Adler above at [372] (upheld by the Court of Appeal in Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1), Santow J noted that the duties imposed by the section are essentially the same as directors' duties at general law; that, in determining whether a director had exercised reasonable care and diligence, the test was what an ordinary person, with the director's knowledge and experience, might be expected to have done in the circumstances if he or she was acting on his or her own behalf; and that the duty of care and diligence would require special vigilance in a situation of potential conflict, requiring scrupulous concern on the part of those officers who become aware of that transaction to ensure that any necessary corporate approvals are obtained and safeguards put in place. That decision has been cited with approval in recent case law, including Parker v Tucker [2010] FCA 263; (2010) 77 ACSR 525 at [70] per Gordon J and Diamond Hill Mining Pty Ltd v Huang Jim Mining Pty Ltd [2011] VSC 288; (2011) 84 ACSR 616 at [90] per Croft J.

[409]   At first instance in Australian Securities & Investments Commission v Vines above, Austin J in turn noted (at [1058]-[1060]) that the section adopted an objective standard of care measured by reference to what a reasonable person of ordinary prudence would do, which could be more demanding in circumstances where the individual has been appointed by reference to a particular skill possessed by that individual. The Court of Appeal in Vines v Australian Securities & Investments Commission above in turn observed (at [141]-[145]) that the standard of care applicable to the statutory duty is similar to the general law duty and it is not necessary to establish a higher order of negligence in order to establish breach of that duty. In Australian Securities & Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, Austin J noted (at [7203]) that the statutory duty incorporates a minimum standard of diligence and (at [7242]) that the question in respect of a contravention of s 180(1) was whether a company officer failed to meet the standard of care and diligence, and this was to be assessed with regard to the circumstances existing at the relevant time, without the benefits of hindsight and with the distinction between negligence and mistakes or errors of judgment firmly in mind.

404. In Mudgee Dolomite & Lime Pty Ltd v Robert Francis Murdoch; In the matter of Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510, Black J at [100] added the following observation about the operation of s 180 of the Corporations Act:

A question whether this duty is breached can only be answered by balancing the foreseeable risk of harm against the potential benefits that could reasonably have been expected to accrue to the company from the conduct in question: Vrisakis v Australian Securities Commission (1993) 9 WAR 395 at 450; 11 ACSR 162 at 209; Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023 at [479], aff’d Cassimatis v Australian Securities and Investments Commission (2020) 376 ALR 261; (2020) 144 ACSR 107; [2020] FCAFC 52; ReFAL Healthy Beverages Pty Ltd [2017] NSWSC 476 at [55]; Taxa Australia Pty Ltd v G Wang (2018) 130 ACSR 531; [2018] NSWSC 1412. …

405. In Colorado, Black J at [419]–[421] also conveniently summarised the principles relevant to an alleged contravention of ss 181 of the Corporations Act as follows:

[419] Section 181(1) of the Corporations Act requires a director or other officer of a corporation to exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation, and for a proper purpose. In Chew v R (1991) 4 WAR 21; 5 ACSR 473 at 499, Malcolm CJ summarised the requirements of that duty as being that directors (1) must exercise their powers in the interests of the company, and must not misuse or abuse their power; (2) must avoid conflict between their personal interests and those of the company; (3) must not take advantage of their position to make secret profits; and (4) must not misappropriate the company's assets for themselves.

[420] The case law is divided as to whether a contravention of s 181(1)(a) of the Corporations Act requires that it be established that a director engaged deliberately in conduct which he or she knew was not in the company's best interests: for example, Forge v Australian Securities and Investments Commission [2004] NSWCA 448; (2004) 213 ALR 574 at [245] per McColl JA (with whom Handley and Santow JJA agreed); Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd above at [150], varied on appeal on another point in V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd above. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1, the Court of Appeal of the Supreme Court of Western Australia unanimously held that the corresponding general law duty to act in good faith in the company's best interests was subjective and would be complied with if directors honestly believed they acted in the company's best interests (at [923] per Lee AJA, at [1988] per Drummond AJA, [2027], at [2772], [2795] per Carr AJA). The alternative view is that a contravention of that limb of s 181 can be established if the law objectively considers that what the director did was improper, even if the director subjectively believed that he or she was acting in the company's best interests: see, for example, Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261 at 270-271; 6 ACLC 529 per King CJ; Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd [2011] VSCA 392; (2011) 86 ACSR 277 at [32]-[33]. The difference in those approaches does not seem to me to be material for the purposes of this case. The section may be contravened if a director promotes his or her personal interest in a situation where there is a conflict or real or substantial possibility of a conflict between those interests and the company's interests: Australian Securities and Investments Commission v Adler above at [735]; Parker above at [72].

[421] A contravention of s 181(1)(b) may also be established if a director does not exercise his or her powers for the purpose for which they were conferred or exercised them for an improper purpose, and the bulk of authority indicates that question is to be determined objectively: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 at 137 per Ipp J (with whom Malcolm CJ and Seaman J agreed); Australian Securities and Investments Commission v Adler above at [738]-[739]; Parker above at [73]. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) above, the majority held that whether a director acts for an improper purpose, for the purposes of the corresponding general law duty, is determined objectively involving an assessment by the Court of what was reasonable in the circumstances (at [933] per Lee AJA, at [1988], [2027], [2073] per Drummond AJA). By contrast, Carr AJA held that the test whether directors had acted for an improper purpose was primarily subjective, although a decision would be voidable if directors acted in good faith for a purpose that was beyond their powers or for a collateral purpose (at [2923]).

406. In Colorado, Black J at [432]–[433] went on to summarise the principles relevant to the alleged contravention of ss 182 of the Corporations Act in the following way:

[432] Section 182(1) of the Corporations Act prohibits a director, secretary, officer or employee of a corporation from improperly using his or her position to gain an advantage for himself or herself or someone else or cause detriment to the corporation. An objective standard is to be applied in determining what amounts to an "improper" use of position, and impropriety is established by "a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case": R v Byrnes above at 514-515 per Brennan, Deane, Toohey and Gaudron JJ; R v Towey (1996) 132 FLR 434; 21 ACSR 46 at 57 per Gleeson CJ (with whom Allen and James JJ agreed). In Doyle v Australian Securities and Investments Commission [2005] HCA 78; (2005) 227 CLR 18, the High Court observed (at [35]) that the relevant conduct would be improper if it amounted to:

a breach of the standards of conduct that would be expected of a person in [the director's] position by reasonable persons with knowledge of the duties, powers and authority of his position as director, and the circumstances of the case, including the commercial context.

[433]   It is not necessary that the relevant director gain an advantage for himself or herself or cause a detriment to the company in order to establish a contravention of the section: Chew v R [1992] HCA 18; (1992) 173 CLR 626 at 633 per Mason CJ, Brennan, Gaudron and McHugh JJ. An objective test was also applied to determine whether this section was contravened in Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd above and, in Hydrocool Pty Ltd v Hepburn (No 4) [2011] FCA 495; (2011) 279 ALR 646, Siopsis J followed R v Byrnes, above, in holding that impropriety for the purposes of this section was objective and did not require subjective knowledge of impropriety and followed Chew v R, above, in holding that a contravention could be established although the desired object was not achieved. In Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507 at [32], Gleeson CJ and Heydon JJ noted that, although shareholders cannot release directors from the statutory duties imposed by, relevantly, s 229 (4) of the Companies (SA) Code (which was a predecessor to s 182 of the Corporations Act), their acquiescence in a course of conduct might affect the practical content of those duties and be relevant to a question of impropriety.

407. In Colorado, Black at [443] said this about the principles relevant to an alleged contravention of s 183 of the Corporations Act:

… The Plaintiffs refer to the summary of the elements of a contravention of [s 183 of the Corporations Act] in Commissioner for Corporate Affairs v Green [1978] VR 505 at 510, approved by Santow J in Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2000) 19 ACLC 299 at [114]–[118], namely that a person was at the relevant time an officer of the corporation; he or she acquired the relevant information and did so by virtue of his or her position as officer of the corporation; and he or she made improper use of that information in order to gain directly or indirectly an advantage for himself or herself or for some other person or, alternatively, he or she made that improper use to cause detriment to the corporation. The prohibition in s 183 of the Corporations Act substantially corresponds with the equitable duty of confidentiality and would be contravened where a director used information that was confidential to a company to make a personal profit: for example, Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779 at 783; 12 ACLC 269 per Young J. A broader view of the section would allow its application to an improper use of information obtained by a director, irrespective of whether that information is confidential in equity: for example, in Grove v Flavel (1986) 43 SASR 410; 11 ACLR 161; McNamara v Flavel (1988) 13 ACLR 619; 6 ACLC 802.

408. The principles relevant to the fiduciary duties owed by a director of a company were also drawn together in Colorado, Black J at [351]–[357] stating:

[351]   The relevant principles are well-established. Broadly, the no conflict rule prohibits conduct where a fiduciary has a personal interest or duty owed to a third party which gives rise to a real and sensible possibility of a conflict. That rule and the no profit rule, which provides that a fiduciary cannot obtain a profit from its fiduciary position without the principal's consent, may overlap.

[352]   In Boardman v Phipps [1967] 2 AC 46 at 123; [1966] 3 All ER 721; [1966] 3 WLR 1009, Lord Upjohn (dissenting) observed (in a statement that may require clarification as noted in paragraph 353 below) that the:

relevant rule for the decision of this case is the fundamental rule of equity that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict.

His Lordship also there formulated (at 124) the test for whether a conflict exists as whether a:

reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.

[353]   In Chan v Zacharia above at 198, Deane J (with whom Brennan and Dawson JJ agreed) referred to an observation of Sir Frederick Jordan in Chapters in Equity in New South Wales (6th ed 1947) at 115 that:

It has often been said that a person who occupies a fiduciary position ought to avoid placing himself in a position in which his duty and his interest, or two different fiduciary duties, conflict.

This is rather a counsel of prudence than a rule of equity; the rule being that a fiduciary must not take advantage of such a conflict if it arises.

His Honour noted (at 198) that that formulation, even as an unqualified counsel of prudence, may be inappropriate in some circumstances and that:

The equitable principle governing the liability to account is concerned not so much with the mere existence of a conflict between personal interest and fiduciary duty as with the pursuit of personal interest by, for example, actually entering into a transaction or engagement 'in which he has, or can have, a personal interest conflicting ... with the interests of those whom he is bound to protect' (per Lord Cranworth L.C., Aberdeen Railway Co v Blaikie Brothers [1854] 1 Macq 461 at p 471 or the actual receipt of personal benefit or gain in circumstances where such conflict exists or has existed.

[354]   In Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 103, Mason J also referred to Sir Frederick Jordan's observation and noted that:

[t]he fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or real or substantial possibility of conflict between his personal interests and those of the persons whom he is bound to protect.

That formulation places emphasis upon the fiduciary's conduct in making or pursuing a gain, and not merely upon his or her occupying a position where a conflict or potential conflict exists.

[355]   Deane J in Chan v Zacharia above also observed (at 198-199) that the equitable rule involved two themes and that:

The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the 'use of fiduciary position' doctrine is but an illustration or part of a wider 'conflict of interest and duty' doctrine (see, eg, Boardman v Phipps at p 123; N.Z. Netherlands Society "Oranje" Inc v Kuys at p 1229), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain; or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it.

[356]   In Warman International Ltd v Dwyer above at 557-558, the High Court similarly observed that:

A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves "at a level higher than that trodden by the crowd". The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage.

[357]   In Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 199, McHugh, Gummow, Hayne and Callinan JJ formulated the no conflict rule as follows:

... [t]he fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed.

Consideration

409. Mr Chaudhry was a director of EMIS at all relevant times from 26 September 2019 until 22 February 2023 when he was removed by Dr Kyatt. As a result, in that period he owed the duties contained in ss 180, 181, 182 and 183 of the Corporations Act as well as fiduciary duties to EMIS. In relation to the allegations put by the plaintiffs, in closing submissions the plaintiffs identified the duties contained in ss 181 and 182 of the Corporations Act as central to their case.

410. The essence of the allegations made by the plaintiffs against Mr Chaudhry is that he conspired with Mr Ibrahim to the exclusion of Dr Kyatt to deprive EMIS of its lease of the Engadine Premises, established Focus Radiology and set in train Focus Radiology Engadine.

411. 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.

412. 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.

413. From July 2022 onwards, Dr Kyatt worked to recover the lease of the Engadine Premises for EMIS, entering into drawn-out negotiations with Mr Ibrahim through their respective lawyers, ultimately resulting in the Deed of Settlement between them. This resulted in the rebranding process for the Engadine Premises to Focus Radiology coming to a halt in some respects from August 2022 until around November 2022 when it was revived. This is evidenced by the email on 15 August 2022 from Ms Coles sent to Focus staff, copied to Mr Chaudhry, with the subject line ‘Referrals / Film Bags / Appointment Cards’, informing them that new referrals, film bags and appointment cards were going to be delivered to the clinics in the coming week but warning that their use at the Engadine Premises should be held off and that they should “continue to use the [EMIS] stuff until further notice”.

414. There is no evidence that Mr Chaudhry had any involvement:

1. in the operations or management of Engadine Medical Imaging, 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 Engadine Premises in the name of Engadine Medical Imaging;

3. in the steps taken across September, October and November 2022 by Mr Ibrahim to obtain the Focus Engadine Lease of the Focus Engadine 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.

415. 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 Engadine Medical Imaging 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 Engadine Medical Imaging. In my opinion, the plaintiffs 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 Engadine Medical Imaging.

416. In relation to the allegation that Mr Chaudhry induced or attempted to induce employees or contractors of EMIS, presumably to leave EMIS and join Engadine Medical Imaging, or assisted Mr Ibrahim to do this, the only evidence of steps being taken to have employees of EMIS leave and join Engadine Medical Imaging 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.

417. In relation to the allegation that Mr Chaudhry retained and used for the benefit of himself and others and other than for the benefit of EMIS, the Confidential Information, or alternatively assisted Mr Ibrahim to do this, this allegation essentially fails for the same reasons as I have stated above for the failure of the confidential information claim against Mr Ibrahim, being the failure to identify what precise information Mr Chaudhry is said to have used the failure to demonstrate how Mr Chaudhry is said to have used the Confidential Information, and how such a use has caused loss to the plaintiffs or gain to Mr Chaudhry.

418. In relation to the allegation that Mr Chaudhry canvassed, solicited and accepted approaches from customers of the Engadine Practice, or alternatively assisted Mr Ibrahim to do this, there is simply no evidence to support this allegation.

419. In relation to the allegation that Mr Chaudhry established the Competing Business and used the Confidential Information and property for its benefit to the exclusion of EMIS and other than for the benefit of EMIS, or alternatively assisted Mr 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 Engadine Medical Imaging. Further, the allegation about the Confidential Information essentially fails for the same reasons as I have stated above for the alleged breach arising from use of the Confidential Information.

420. In relation to the allegation that Mr Chaudhry refused and/or neglected to sign documents to enable the New Lease to be assigned from Engadine Medical Imaging to EMIS, there is no evidence that he did so. Dr Kyatt admitted that he did not ask Mr Chaudhry to do so and Mr Inayat was not called as a witness to say that he had asked Mr Chaudhry to do so. The Deed of Assignment was signed on 23 February 2023 on behalf of EMIS by Dr Kyatt. Mr Chaudhry had been removed as a director of EMIS the day before.

421. In my opinion, all of the pleaded allegations against Mr Chaudhry to the effect that he breached his statutory and fiduciary duties as a director of EMIS fail.

ISSUE 3: RELIEF

422. In light of the findings that I have made that none of the claims against Mr Ibrahim and Mr Chaudhry have been established it is not strictly necessary for me to make any findings about any relief that I might have granted to the plaintiffs if I had upheld one or more of their claims.

423. I do, however, want to make these comments about the way the case in relation to monetary relief was made, noting that the trial was held to deal with all issues of liability and relief.

424. I was not provided with any expert evidence on behalf of the plaintiffs to assist me in establishing the alleged value of EMIS but instead was asked to infer it from:

1. the amount paid in 2018 by Dr Kyatt for 51% of the Engadine Practice; plus

2. a further amount commensurate with the profit lost by EMIS.

425. I consider that this would be a highly unsatisfactory way in which to proceed to grant monetary relief in this case. Informing me that on 12 February 2018, Dr Kyatt paid $319,218.91 to Mr Ibrahim to acquire a 51% controlling interest in the Engadine Practice on behalf of Advanced Imaging tells me nothing about the value of those units in the Engadine Imaging Trust in 2024. Further, giving me profit and loss figures for EMIS in 2019, 2020, 2021 and 2022 does not provide me with any reliable indicator of what those units would be worth in 2024.

426. I agree with the closing submissions of Mr Ibrahim and Mr Chaudhry. The plaintiffs did not demonstrate by admissible evidence any loss which could support the claims against Mr Ibrahim and Mr Chaudhry.

ORDERS

427. For the reasons set out above, the plaintiffs have failed in their claims against Mr Ibrahim and Mr Chaudhry. They have also abandoned their claims against Engadine Medical Imaging, Focus Radiology Dapto, Focus Radiology Warrawong, Dapto Imaging and Warrawong Imaging. Accordingly, I propose to make the following orders:

1. The further amended statement of claim filed 18 July 2024 is dismissed.

2. The plaintiffs are to pay the costs of the defendants.

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Decision last updated: 06 November 2024