FEDERAL COURT OF AUSTRALIA

Brecher v Barrack Investments Pty Limited (No 2) [2020] FCA 911

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The cross-claim be dismissed.

3.    Unless any party applies within 7 days for a different order as to costs:

a.    the applicants pay the respondents’ costs of the application, and

b.    the cross-claimants pay the cross-respondents’ costs of the cross-claim.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THAWLEY J:

A    OVERVIEW

1    On 15 October 2015, Dr Brecher and Dr Rashid executed four documents at the offices of Acorn Lawyers (SCMI transaction documents, giving effect to the SCMI transaction). These four documents marked the commencement of an unsuccessful venture through the vehicle South Coast Medical Imaging Pty Ltd (in liquidation) (ACN 608 363 140) as trustee for the South Coast Medical Imaging Unit Trust (SCMI). The venture involved the merger of Dr Brecher’s existing radiology practice at Dapto (SCXR Dapto) with a new radiology practice (Barrack Heights practice) to be opened at Centre Health Complex Barrack Heights (Barrack Heights or CHC Barrack Heights) in a building which was owned by a company associated with Dr Rashid, Barrack Investments Pty Ltd.

2    SCMI’s new radiology practice at Barrack Heights commenced providing full services on or about 6 April 2016, having been handed over to SCMI on 15 February 2016. It was located in an area of CHC Barrack Heights which, after 15 October 2015, was fitted-out for the purpose by Delbest Pty Ltd, another company associated with Dr Rashid.

3    Funding for SCMI was sourced mainly from the Australia and New Zealand Banking Group Limited (ANZ) which advanced approximately $1.6 million. Dr Rashid and Dr Brecher executed guarantees and indemnities in favour of ANZ (ANZ Guarantee).

4    SCMI did not generate sufficient revenue. On 3 July 2017, an administrator was appointed. On 9 April 2018, it went into liquidation.

5    The witnesses’ accounts of what occurred at the meeting on 15 October 2015 were starkly at odds with each other.

6    On Dr Brecher’s case, Mr Ashutosh Agarwal of Acorn Lawyers, whom Dr Brecher had never met before, told him that: Acorn Lawyers acted for him and his company; the new business to be conducted by SCMI would generate $5,000,000 in the first year, $7,500,000 in the second year and $10,000,000 in the third year; Dr Rashid was a very important businessman in the region; and Dr Brecher should immediately execute the transaction documents, drafts of which had only just been completed, before Dr Rashid left overseas the next day.

7    Dr Rashid’s case was that Acorn Lawyers acted for SCMI only and that Mr Agarwal never represented otherwise. His case was that Mr Agarwal recommended that the SCMI transaction documents not be executed on the day and that Dr Brecher obtain independent legal advice. Dr Rashid denied that Mr Agarwal made any projections regarding SCMI’s revenue as asserted by Dr Brecher. Dr Rashid’s account was supported by the account given by Mr Agarwal.

8    The parties proceeded on the basis that someone was being untruthful about what was said at the meeting; the differing accounts were unlikely to be explained by faulty recollections.

9    By the SCMI transaction documents executed on 15 October 2015, SCXR Dapto was “rolled into” SCMI. Dr Brecher had purchased SCXR Dapto on 31 March 2014 for $2.5 million. Dr Brecher contended that he gave up his interest in SCXR Dapto for no or inadequate consideration. Dr Brecher also contended that he was unaware that the new radiology practice at Barrack Heights would be renting its premises from a company associated with Dr Rashid, Barrack Investments. He also contended that, when entering into the SCMI transaction, he did not know that the fit-out for the new premises was to be conducted by a second company associated with Dr Rashid, Delbest.

10    The events of 15 October 2015 must be examined in light of what occurred before that day. Dr Brecher and Dr Rashid had a number of discussions leading to them entering into the SCMI transaction. Dr Brecher contended that Dr Rashid made a number of misrepresentations in these discussions. He contended that he entered into the SCMI transaction in reliance on these misrepresentations.

11    By a cross-claim, Dr Rashid reciprocated by alleging that Dr Brecher had made a number of misrepresentations during discussions which occurred before 15 October 2015. The various alleged misrepresentations are addressed in more detail later in these reasons. Dr Rashid’s cross-claim also alleged that Dr Brecher had engaged in misleading or deceptive conduct in causing to be provided to Dr Rashid an inaccurate profit and loss statement and balance sheet concerning SCXR Dapto. Dr Rashid contended that he would not have entered into the SCMI transaction had he known the true financial position of SCXR Dapto. Amongst other losses claimed, Dr Rashid claimed that Barrack Investments would have leased an area at CHC Barrack Heights (Radiology Area) to a third party for the purpose of opening a radiology practice.

12    Dr Rashid also contended that, after the SCMI transaction had been entered into on 15 October 2015, Dr Brecher engaged in business and earned fees in breach of one of the SCMI transaction documents.

13    Dr Brecher had also made a series of claims against Acorn Lawyers. These claims were settled between the relevant parties during the hearing.

14    For the reasons which follow, each of the claims brought by Dr Brecher (and his interests) and each of the cross-claims brought by Dr Rashid (and his interests) are not made out and must be dismissed.

B    THE PARTIES

B.1    Dr Brecher and associated entities

15    The first applicant is Dr Eric Brecher (Dr Brecher). The second applicant is Eric Brecher Pty Ltd (EBPL). Dr Brecher is the sole director of, and shareholder in, EBPL. EBPL is the trustee of the South Coast X-Ray Unit Trust (SCXR Unit Trust) and the Eric Brecher Discretionary Trust.

16    EBPL, as trustee of the SCXR Unit Trust, owned and operated SCXR Dapto, a radiology practice conducted from leased premises at Dapto, trading as “South Coast X-Ray”. It purchased this business on 31 March 2014 for $2.5 million. In order to acquire and conduct this business, EBPL entered into certain leases and obtained finance on security. It borrowed money from Dr Brecher, Medfin Australia Pty Ltd (Medfin) and the Bank of Queensland (BOQ). The Medfin Facilities and BOQ Loans were secured, including by a guarantee given by Dr Brecher. EBPL also entered into leases with GE Commercial Pty Limited (later, Alleasing) for the lease of equipment and granted security over the leased equipment (Alleasing Securities).

17    Dr Brecher is a radiologist from the United States of America, specialising in the reading of images taken through medical imaging practices, including ultrasound, X-ray, CT (Computed Tomography) scan, MRI (Magnetic Resonance Imaging) scan, OPG (Orthopantomogram) scan and mammography machines. He has for some years worked in radiology in Australia and elsewhere. He described himself as a “prolific reader of radiology cases”. He explained what he meant by this, namely that, whereas a busy radiologist can read up to one hundred and fifty reports in a day, Dr Brecher can read three to four hundred in a day.

18    Dr Brecher was neither a reliable nor credible witness. He was cross-examined at length by counsel for Dr Rashid’s interests and counsel for Acorn Lawyers. I have taken the length and vigour of the cross-examination into account in making findings on credibility and reliability. The length of cross-examination was significantly contributed to by Dr Brecher’s often extensive responses to simple questions. These extensive answers were often argumentative, sometimes unresponsive, and occasionally perforated by statements that he was a “victim” and a credible witness.

19    Dr Brecher often provided answers to what he considered was being implied by questions rather than attempting a direct answer. He would accuse the cross-examiner of having no basis for asking questions and of speculating or even lying. Dr Brecher was also prone to asserting misconduct on the part of others with little or no established justification. Blame for events which he did not like, and allegations of misconduct, came easily to Dr Brecher, both as a witness and as revealed by the events which occurred. He was prone to angry outbursts. Examples are set out in the factual background below. Dr Brecher was quick to find fault in others and resilient to accepting responsibility. These characteristics, and those mentioned above, affected the manner in which Dr Brecher gave evidence as well as, importantly, the content and reliability of it.

20    More significantly, his oral evidence often sat uncomfortably at best with the contemporaneous documents and, at worst, in obvious conflict with them. His account as to the relevant events, usually put with great conviction, would change as documents were put to him and as he struggled to explain away the inconsistencies in his earlier evidence.

21    Dr Brecher did not give an accurate, frank or objective account of the relevant events. He was prepared to mislead whenever he perceived it would suit his interests.

22    Evidence was also given by Ms Renee Hyratt. She was Dr Brecher’s domestic partner and was the practice manager of SCXR Dapto. Ms Hyratt gave evidence which in some respects corroborated Dr Brecher’s evidence. In terms of demeanour, Ms Hyratt presented as generally credible. However, there were important aspects of her evidence which cannot be accepted as accurate. That may be a result of the ordinary process of reconstruction after the events, affected as it inevitably would be by the passage of time, the subconscious effect of interest in the result of the litigation, the effect of supporting Dr Brecher with his justifications and accounts of what occurred and the emotional strain that litigation brings.

B.2    Dr Rashid and associated entities

23    The first respondent is Barrack Investments. It has two issued shares one of which is registered in the name of Dr Mohamad Rashid (Dr Rashid), the third respondent. Barrack Investments is the registered proprietor of the land where the medical centre referred to as CHC Barrack Heights is located.

24    The second respondent is Delbest. It has two issued shares one of which is registered in the name of Dr Rashid.

25    Since around 2006, Barrack Investments and Delbest have conducted an integrated medical health business known as “Centre Health Barrack Heights” or “Centre Health Complex Barrack Heights”. Barrack Investments rents parts of the premises to third party health care providers. In addition, self-employed medical practitioners provide health care services to patients from CHC Barrack Heights and pay Delbest a fee for providing them with facilities and support services.

26    Dr Rashid is a medical doctor. Dr Rashid was a very softly spoken man. He was careful about giving his evidence. I found his evidence to be mostly reliable. His evidence generally sat comfortably with the contemporaneous documents. His recollection of all of the events and conversations was not perfect as is to be expected.

27    Dr Rashid is also a director and shareholder of Romore Pty Limited (Romore). Romore is the trustee of the Rashid Family Trust.

B.3    Acorn Lawyers

28    The fourth respondent was Mr Ashutosh Agarwal (sometimes referred to in evidence as Ash), who is a lawyer and director of the fifth respondent, Acorn Lawyers Pty Ltd (Acorn Lawyers). As mentioned, the proceedings against the fourth and fifth respondents settled during the hearing.

29    The employees of Acorn Lawyers included a solicitor, Mr Rocco Musumeci, who was present at parts of the meeting on 15 October 2015.

30    I found Mr Agarwal and Mr Musumeci to be generally credible witnesses. They were called to give evidence by Dr Rashid and his interests.

C    SUMMARY OF THE APPLICANTS’ AND CROSS-CLAIMANTS’ CASES

C.1    Application to amend the amended statement of claim

31    On 5 December 2019, after the conclusion of the hearing, the applicants filed an interlocutory application seeking leave to amend further the amended statement of claim.

32    The amendments sought to engage the Australian Consumer Law, as adopted in New South Wales by s 28 of the Fair Trading Act 1987 (NSW) (ACL (NSW)), as an alternative to its claims relying upon the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth) (ACL (Cth)). The perceived advantage of this was apparently to facilitate an argument that the defence of contributory negligence pleaded by Dr Rashid and his interests was not available in respect of a claim under s 18 of the ACL (NSW). The argument was that s 137B of the Competition and Consumer Act 2010 (Cth) does not apply to the ACL (NSW) on the basis that it is not incorporated as a law of New South Wales by s 28 of the Fair Trading Act 1987 (NSW). The applicants referred in this respect to the decision of Campbell JA in Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231 at [141]. Dr Rashid and his interests opposed the amendments on the basis that they were futile.

33    I allow the amendments. There is no prejudice to the respondents in allowing the amendments. It is not necessary to decide whether the amendments are futile because, for the reasons given below, the issue of contributory negligence does not arise on the conclusions ultimately reached. Nevertheless, the amendments should be allowed, as they may be relied upon in the event that a party decides to appeal.

34    At the conclusion of the hearing, the applicants and the remaining respondents, Dr Rashid and his interests, identified 40 issues to be determined in light of the way in which the case had been conducted. These are each dealt with below. There is benefit in also summarising some of the main allegations made by the applicants and the cross-claimants, as pleaded in the further amended statement of claim (FASOC) and the cross-claim.

C.2    The further amended statement of claim

35    A substantial number of the issues turned on whether Dr Rashid engaged in misleading or deceptive conduct, principally by making representations or adopting representations alleged to have been made by Mr Agarwal.

36    First, the applicants relied upon conduct said to have occurred before 15 October 2015: FASOC [14] to [18], [68]. It was asserted that:

(1)    in late June or early July 2015, Dr Rashid represented to Dr Brecher that there would be a lot of work for a radiologist at CHC Barracks Height: FASOC [14];

(2)    Dr Rashid represented that a previous tenant (PRP Diagnostic Imaging Pty Ltd) which had conducted a radiology practice at CHC Barrack Heights had left because of a dispute it had with Wollongong Nuclear Medicine, another tenant in CHC Barrack Heights: FASOC [15];

(3)    in the first half of July 2015, Dr Rashid represented that:

(a)    he had 20 full-time General Practitioners (GPs) working at CHC Barrack Heights and was expanding to 40;

(b)    he was bringing in multiple specialists, including five obstetricians and gynaecologists;

(c)    an additional floor was to be added to the medical centre; and

(d)    as such, Dr Brecher did not have to be concerned about the profitability of the practice to be conducted at CHC Barrack Heights: FASOC [16];

(4)    in about mid-July 2015, Dr Rashid:

(a)    showed Dr Brecher plans for CHC Barrack Heights indicating where, inter alia, the 20 new GPs and the new specialists would practice;

(b)    represented to Dr Brecher that the expansion would be completed by the end of 2019;

(c)    undertook to find a neutral lawyer to represent both men and the business to be conducted by them from CHC Barracks Heights; and

(d)    represented that the Barrack Heights practice would have enough work to justify the applicants’ involvement: FASOC [17]; and

(5)    at various times, including in about September 2015, Dr Rashid undertook to Dr Brecher to find a lawyer to work for the two men and to draft the legal documents for the proposed Barrack Heights practice: FASOC [18].

37    Secondly, the applicants alleged that representations were made on 15 October 2015, when Dr Brecher and Dr Rashid executed the four agreements which implemented the SCMI transaction at Acorn Lawyers’ office. It was alleged that Mr Agarwal represented to Dr Brecher that:

(1)    he and Acorn represented Dr Brecher, Dr Rashid and SCMI and would be performing work for Dr Brecher;

(2)    the turnover of revenue of the Barrack Heights practice was expected to be $5 million for the first year, $7.5 million in the second year and $10 million in the third year;

(3)    Dr Rashid would take out a loan in the sum of $2.5 million, of which up to $1.5 million would be used for the fit-out of the Barrack Heights practice and the balance would be spent on equipment;

(4)    Dr Rashid would be negotiating the new lease for the Barrack Heights practice, and the rent would be about $25,000 per month;

(5)    the Barrack Heights practice would be up and running by 15 January 2016;

(6)    Dr Rashid would recruit new doctors and build up the number of doctors working at CHC Barrack Heights; and

(7)    anything in EBPL’s bank account, as at the date of execution of the SCMI transaction documents, was Dr Brecher’s and Dr Brecher could take that money out at any time. This statement was allegedly made in response to a statement by Dr Brecher that he had put between $500,000 and $600,000 into SCXR Dapto and that he needed to get that loan back: FASOC [37].

38    It was alleged that Dr Rashid did not contradict or qualify what Mr Agarwal had said and that Mr Agarwal’s representations were adopted by Dr Rashid’s conduct, including by remaining silent: FASOC [38].

39    It was alleged that Mr Agarwal gave Dr Brecher a brief summary of the documents he and EBPL were to sign and did not advise Dr Brecher that the effect of the documents was to advantage the commercial interests of others over those of EBPL and Dr Brecher: FASOC [40].

40    It was alleged that Dr Rashid did not inform Dr Brecher that Dr Rashid had an interest in Barrack Investments or Delbest, the latter of which would or might undertake the fit-out works for the Barrack Heights practice: FASOC [41].

41    It was alleged that Dr Brecher and EBPL executed the documents in reliance, amongst other things, on the representations detailed in [37] above and on the basis of conduct engaged in by Dr Rashid: FASOC [42].

42    It was alleged that Dr Rashid and his interests engaged in unconscionable conduct within the meaning of s 21 of the ACL (Cth) and ACL (NSW): FASOC [83], [84].

43    It was alleged that Dr Brecher and EBPL suffered loss and damage, resulting from the alleged breaches of ss 18, 20 and 21 of the ACL (Cth) and ACL (NSW), as follows:

(1)    In the case of EBPL:

(a)    lost profits;

(b)    its capital;

(c)    the value of its business; and

(d)    the lost opportunity to repay in whole the monies due under the Medfin Facilities, the BOQ Loans, and the Alleasing Securities, or to repay more than anything SCMI caused to pay over 2016 and 2017.

(2)    In the case of Dr Brecher:

(a)    as:

(i)    EBPL ceased trading; and

(ii)    SCMI did not pay out the Medfin Facilities and the BOQ Loans and the Alleasing Securities or cause them to be repaid as quickly as would have been the case had EBPL continued to trade,

        he is under a greater financial liability under the guarantees given in support of those facilities;

(b)    such liability as Dr Brecher has under the ANZ Guarantee; and

(c)    Dr Brecher has lost income and the opportunity to recover his loans from EBPL.

44    It was alleged that Dr Rashid breached a fiduciary duty owed to Dr Brecher and EBPL: FASOC [89] to [93]. These breaches were said to given rise to the same loss and damage as identified above as having arisen from the breaches of the ACL (Cth) and ACL (NSW). There was no claim specifically made in the section of the pleading alleging breach of fiduciary duty on the part of Dr Rashid for disgorgement of profits made by Delbest in relation to the fit-out carried out for the new radiology practice to be opened at Barrack Heights. However, it was pleaded in [52] of the FASOC, which set out material facts after 15 October 2015, that the fit-out could have been carried out faster and at a lower cost.

45    It was alleged that the Deed of Acknowledgement executed on 15 October 2015 was void for uncertainty: FASOC [66]. However, this was not identified as an issue which needed to be determined at the conclusion of the hearing and was not the subject of any submission.

C.3    The cross-claim

46    Dr Rashid, Barrack Investments and Delbest cross-claimed against Dr Brecher and EBPL. Their case, in summary, was that:

(1)    Dr Brecher and EBPL agreed to purchase SCXR Dapto in the name of the SCXR Unit Trust for $2.5 million, which was substantially more than its value. The purchase was funded, amongst other things, through facilities provided by Medfin. EBPL, in some cases as trustee for the SCXR Unit Trust, also entered into operating lease agreements with GE Commercial and loan agreements with the BOQ.

(2)    By 30 August 2015, Dr Brecher knew that Dr Rashid was considering:

(a)    leasing a part of Barrack Heights to Primary Healthcare Limited, through its subsidiary Healthcare Imaging Services Pty Ltd, for the purpose of opening a radiology practice; or

(b)    establishing a radiology practice at Barrack Heights himself or through associated entities.

(3)    A new radiology practice at Barrack Heights would be a competitor of SCXR Dapto.

(4)    By 30 August 2015, Dr Brecher knew or ought to have known that:

(a)    SCXR Dapto could not repay its liabilities from operating cash flows;

(b)    Dr Brecher had a contingent personal liability to repay those liabilities; and

(c)    SCXR Dapto’s liabilities exceeded its assets and its debts exceeded its enterprise value and the business was making operating losses and was not able to pay its debts as and when they fell due.

(5)    Dr Brecher made a series of representations to Dr Rashid on 30 August 2015 about his ability as a radiologist and the financial position of SCXR Dapto. The alleged representations, referred to as the “Restaurant Representations”, were:

(a)    SCXR Dapto had been operating for 20 years or more;

(b)    Dr Brecher could provide better radiology services to CHC Barrack Heights’s clients than Healthcare Imaging;

(c)    SCXR Dapto was a substantial business having a gross income of $2.8 million per year and net profit of $350,000 per year;

(d)    The SCXR Unit Trust was the owner and operator of SCXR Dapto;

(e)    SCXR Dapto’s only debts were $2.2 million which it owed Medfin;

(f)    SCXR Dapto had no liabilities other than the Medfin Facilities of $2.2 million;

(g)    Dr Brecher worked six days a week, he did not take holidays and he did not have commitments to distract him from work;

(h)    Dr Brecher could read and analyse 400 radiology reports a day;

(i)    Dr Brecher could manage five or six other radiology practices without needing to hire another radiologist as Dr Brecher had the capabilities, skill and experience to manage the practices remotely;

(j)    Dr Brecher owned real estate assets and a collection of expensive paintings in the United States; and

(k)    Dr Brecher could not get finance in Australia because Australian banks did not lend against assets in the United States.

(6)    Dr Brecher suggested, on 30 August 2015, that he and Dr Rashid set up a new company, involving a merger of SCXR Dapto with a new radiology practice at Barrack Heights.

(7)    The representations were misleading or deceptive and made with the intention, amongst other things, of encouraging Barrack Investments, Delbest, Dr Rashid and Romore to go into business with Dr Brecher rather than leasing the radiology area at the Barack Heights Centre to Healthcare Imaging.

(8)    On 31 August 2015, Dr Brecher caused a profit and loss statement of the SCXR Unit Trust’s income and expenses for the 2014-2015 financial year to be sent to Dr Rashid. This was given to Dr Rashid with the intention that it be relied upon in establishing the financial performance of SCXR Dapto and supporting its value and encouraging Dr Rashid to go into business with Dr Brecher. It conveyed representations or contained information which was misleading and deceptive.

(9)    On 7 October 2015, Dr Brecher caused a balance sheet that purported to show the SCXR Unit Trust’s assets and liabilities as at 30 June 2015 to be given to Dr Rashid. This was given to Dr Rashid with the intention that it be relied upon in establishing the financial performance of SCXR Dapto and supporting its value and encouraging Dr Rashid to go into business with Dr Brecher. It conveyed representations or contained information which was misleading and deceptive.

(10)    Dr Rashid relied on the Restaurant Representations, the profit and loss statement and the balance sheet in agreeing to Dr Brecher’s proposal and not entering into a lease with Healthcare Imaging.

47    Although the cross-claim pleaded that Dr Brecher made further representations on 2 September 2015, these were not identified as an issue at the conclusion of the hearing and were not the subject of any submission.

48    The cross-claimants also alleged that Dr Brecher earned fees performing work in breach of cl 6.1 of the Share Holders and Unit Holders Deed executed on 15 October 2015.

D    THE FACTS

49    It is not practical to mention every piece of evidence adduced or event traversed in the course of the trial. I have considered all of the evidence as well as the lengthy written submissions advanced in respect of the evidence. The findings of fact set out below are based on the whole of the evidence, including close observation of witnesses when giving oral evidence about contested matters, particularly conversations, and the consistency of that evidence with the surrounding circumstances and contemporaneous documents.

D.1    Early 2014 to 31 March 2014: Purchase of SCXR Dapto

50    In early 2014, Dr Brecher commenced looking for a radiology practice to purchase. He found SCXR Dapto, a practice which was trading as “South Coast X-Ray”. He described it as a “small rundown practice in Dapto”. In the financial year ended 30 June 2013, SCXR Dapto generated revenue of $1,894,449. The profit was $191,370. Through EBPL, Dr Brecher purchased SCXR Dapto for $2.5 million. It was Dr Brecher’s case that he did not pay more than market value.

51    Dr Brecher engaged accountants from Crowe Horwath to provide advice in relation to the purchase. Dr Brecher had provided Mr Fintan Connolly of Crowe Horwath with “numbers provided by Dr Stanton”. Dr Arthur Stanton’s company had been the owner of SCXR Dapto. On 31 January 2014, Mr Connolly wrote an email to Dr Brecher which included:

While there is plenty of room for improvement for the South Coast XRay business my concern is that you should not overpay for a business with crap numbers and old equipment. Capacity to service borrowings will be critical.

52    In cross-examination, Dr Brecher said that Mr Connolly supported his purchase. Dr Brecher, when shown this email, gave the following evidence:

Yes. So already he’s cautioning you about overpaying for the business; do you agree with that?---Yes. But I had phone conversations with him where I discussed with him some of the other reasons why I was interested in purchasing South Coast X-Ray. And when I explained it to him he was quite in favour of why I was going ahead doing this.

And is it your evidence that he was supportive of you paying $2.5 million?---Yes. When I – when I went and explained to him my other reasons for wanting to purchase the business – remember, it was an independent valuation between two and to say it’s – I overpaid – so people could say that, you know, it was at the top of the range, you know, that I paid within the range. But when I explained to him other reasons why I was interested in purchasing the business, he became much more supportive.

53    Dr Brecher wrote an email to Mr Connolly on 3 February 2014 which included:

Maybe we should use an independent appraiser to value the equipment as the value is key if the practice fails. I would like to incentivise all the key people at the company to make sure they are working to their full capacity to build up this business. I’m a little concerned about the financial backing although Andrew Fraser from Medfin has told me he sees no problem with me getting the full loan.

There are important upgrades that need to be made to the practice. I believe that the entire office needs to be refurbished. Also it’s critical that they upgrade their PACS [Picture Archiving and Communication System] and RIS [Radiology Information System]. These costs can be in the 100-200K range.

54    Mr Connolly and Dr Brecher exchanged emails on 4 February 2014. Mr Connolly wrote to Dr Brecher stating:

I got a call from Michael [Mr Michael Gray was an employee of the Dapto practice] this morning, I presume further to your call with him last night. He is following up on getting information through.

I also received the profit and loss account for the last six months from Dr. Stanton. On the basis that the company made a net profit of $180k for six months, which seems less strong than you might have hoped for, I will continue to follow up on information and continue the review work as planned.

55    Dr Brecher responded on 4 February 2014:

I really would like to buy this practice so can you please try to negotiate another fair price for the practice if need be. I’m willing to overpay for it but not to an extent where I would lose more than 500K. Can you please make sure to give them the best offer possible for the practice but not one that I’m too exposed to financial ruin.

56    Mr Connolly replied to Mr Brecher later that day:

In terms of the price, I am doing homework around pricing and I am happy to deal with Dr. Stanton in structuring a deal. I will not be putting forward any offer/negotiation without your approval first. With a purchase of a $2.5m business the extent of your risk, if the bank lends you $2.5m is the full amount, you will need to get comfortable that the business will produce enough cash to service the debt and justify the price. While we can help in pulling information together, you ultimately will need to form a view as a practicing radiologist on the value and prospects of the business.

I have emailed Arthur Stanton, lets see what he comes back with.

57    Dr Brecher wrote an email to Dr Stanton on 4 February 2014, saying:

I hope you’re doing great. I really want to wrap this thing up in the next two weeks if possible. Could we please meet with the Accountant and Michael one of the next two upcoming Friday evenings? I’m pushing the accountant to go as fast as possible. I want him to be careful with his due diligence but at the same time I’m hoping to start working at the company in the next 3-4 weeks at [the] latest.

58    On 5 February 2014, Mr Gray and Dr Brecher exchanged emails. Dr Brecher wrote to Mr Gray at 2.39 pm, saying:

I hope you’re well. If it turns out that the practice is not worth 2.5 million, do you think Arthur would be willing to come down so that the bank will finance it completely?

59    Mr Gray responded at 2.51 pm as follows:

Not sure you would have to ask him but he was pretty set on that price. I just spoke to Medfin and they will call u. I will call after work

60    Dr Brecher replied at 3.10 pm:

Unfortunately, it’s not looking good. Looks like the business may be overpriced beyond my ability to get the financing.

61    Dr Brecher was unable to explain in cross-examination why he considered he would not be able to get the financing. His evidence was:

Does that suggest to you [that] you had information from Medfin that they were not going to be financing the full amount of the $2.5 million purchase price?---No. I don’t know what that means.

All right. Can you explain to the court why you said that:

It looks like the business may be overpriced beyond my ability to get the financing.

?---I don’t know why I said that.

62    Dr Brecher emailed Mr Connolly at 1.33 pm on 6 February 2014 as follows:

It looks like Stanton is unwilling to allow anyone to see the financials of the practice for the past two years. I feel duped by this guy and have no[w] expended money on an audit that he knew was going to go nowhere. I may take him to court to recover my expenses because he acted in bad faith.

63    On 11 February 2014, Mr Connolly and Dr Brecher exchanged further emails. Dr Brecher emailed Mr Connolly at 8.18 am stating:

Thanks so much Fintan! I really appreciate this. Depending on Andrew’s assessment of the practice (if he gives the thumbs up to a loan) would you please think about conducting a very extensive audit. I’m very concerned about losing a ton of money if the practice fails.

64    The reference to “Andrew’s assessment of the practice” was a reference to an assessment by Andrew Fraser of Medfin. Mr Connolly sent an email reply that day which included:

You are right to be concerned, the practice seems expensive and does not seem to make enough money to justify the price. I am happy to arrange for a review, get some expert input to conduct a review of the practice etc, but we need to get solid basic information.

Depending on what Andrew comes back with, it might make sense for me to go and see Dr. Stanton and try and get him to be more supportive with information. However, my guess is that he is not sharing numbers with you because they are terrible; but lets see.

65    On 13 February 2014 at 6.29 pm Mr Connolly sent an email to Dr Brecher which included:

[Andrew Fraser] has spoken to Michael and they are willing to provide two years of income and expense statements. Andrew is also arranging for an independent practice valuation which will take about a week to do. I have asked him to provide you and I with the accounts and valuation when he gets them. Lets see what they come back with.

In the meantime, I have been speaking with Ben Willis from the immigration law firm and he was to send you an email with some thoughts on the way to proceed. Has he been in touch with you?

66    Dr Brecher replied to Mr Connolly the next day at 9.39 am, stating:

It went great. Can you please get involved to make sure that the evaluation is proper and I’m not overpaying too much for the company? Can you also get into contact with Alan Pham the owner of the company I’m working for [Insight Radiology]. I’m hoping to work out a favorable deal with him in which he would get a piece of the company and I would hopefully get a portion of his company. He also knows the business extremely well and can tell you about what exactly to look at when buying a radiology practice. His email is: [email address].

67    In cross-examination, Dr Brecher explained that Mr Alan Pham had a few practices in 2014 which generated a turnover of many millions. He explained:

So this deal that you were considering pursuing, was that a partnership with Mr Pham?---No, I’m not sure. I mean, my feeling was – because I felt like a fish out of water and Alan Pham had a lot of experience in radiology – he had been running practices – and was looking for his advice in terms of making sure that I do everything properly in terms of what to look for when purchasing the business and setting it up. And I was interested in having him be sort of like a business manager for me where I would give him a percentage of my business and he would potentially give me a percentage of his business, as well as possibly even run my business.

When you say percentage of business, do you mean percentage of the company?---The company, yes.

Yes. And you’re saying here, “I’m hoping to work out a favourable deal with him”, does that suggest that you were initiating these discussions regarding a possible partnership?---Yes, it would probably be me – what I was looking for really was the – trying to get work from him and to give him some of – an interest in Dapto. Once again, I was trying to hedge so that if the company at Dapto didn’t do well, I would have money from my telereporting to help finance the Dapto practice.

But you were already doing telereporting for Dr Pham. You wouldn’t need to be working out a deal with him whereby he would get a piece of your company and he would hopefully – you would hopefully get a portion of his?---I think I – you know, to get more telereporting from him. So to get additional teleradiology as well as to get a interest in his company so that I was not only reporting from him but making a profit from his company that he was making, as well as for him to get profit from my company and to – so it was just a way doing what I was going to do later, and that is to try and increase the footprint so that I wasn’t exposed to just one site.

68    The fact that Dr Brecher had raised with Dr Pham the possibility of each of them owning a portion of each other’s companies lends some support to the fact that it was Dr Brecher who later raised a similar idea with Dr Rashid, rather than Dr Rashid raising the idea with Dr Brecher.

69    Dr Brecher and Mr Connolly exchanged a number of further emails between 18 and 24 February 2014. On 18 February 2014 at 12.06 pm Dr Brecher sent the following email to Mr Connolly:

I’ve resigned my position here at Insight Radiology and therefore have to purchase the Dapto practice. I have no alternative. I’ll have to sell my assets and purchase it if the bank doesn’t loan me the money.

Would you please help me structure a great contract for Luke Whitley who would be in charge of growing the practice. His email is: [email address]. I’m going to start working in Dapto in two weeks and would like him on board if at all possible. His role would be to go out and get as much business as possible and make me as productive as possible. I’d like to make his contract very incentive laden.

70    Dr Brecher sent a further email to Mr Connolly at 10.12 am on 24 February 2014, stating:

I hope you’re well. The evaluation came back at between 1.5-2 million due in part to Arthur Stanton not releasing all his financial information. I’m going to go ahead with the purchase since I have no choice. I have to give away around 500K in kickback money at this juncture so can inject all this money back into the company. I’d hope to get the price down to 2.25 million though because it needs 300K in upgrades asap.

71    When shown this email, Dr Brecher gave the following evidence:

So do you agree, first of all, that Medfin had done its own assessment of the value of the Dapto practice and that that assessment had indicated the practice was only worth between 1.5 to $2 million?---I don’t know if they did that. I don’t know who – who did that.

Well, Dr Brecher, I took you to the earlier emails where it indicated that Medfin was going to be doing its own evaluation of the practice based upon the financials it had. Do you recall that, or do you need me to take you to those emails?---No, because I know that they did it. There was another valuation for 2 to 2.5 million, so I’m not sure exactly who did this valuation, whether or not that was Medfin or someone else.

In the context of this email exchange between you and Mr Connolly, where Mr Connolly is following up Andrew Fraser of Medfin and asking if you’ve heard back, and your response being, “The evaluation came back at between 1.5 to 2 million”, does that suggest to you now, Dr Brecher, that Medfin had conducted an evaluation and it had come back at between 1.5 to 2 million dollars – of the business?---No, I’m not sure who did that evaluation. I assume, like you - - -

Who else did that evaluation, Dr Brecher?---I don’t know. I don’t know who did that.

If you go up the page - - -?---Because I don’t say, you know, Medfin did the evaluation.

Was anyone else interested in the value of the Dapto practice at this stage other than you and Medfin?---I’m not sure who did the valuation.

72    Dr Brecher was also asked about what he was referring to by the phrase “kickback money”:

What are you referring to when you talk about 500k in kickback money?---Yes. This is – I would like to explain this to his Honour. Could I please do that?

Sure?---Okay. So to me, because I was mentioning, you know, what other aspects that were interesting me about buying a company was the fact that I felt like, as a radiologist who had come from overseas as a physician, that people would take advantage of me through my visa – through my – you know, not letting me do work for other sites without permission, giving me – making me accept very low rates, and I believe by not only owning this company, South Coast X-ray, by getting a permanent visa I would be able to negotiate for myself very – higher teleradiology rates and – much higher than I was getting at that time, because I didn’t have this leverage. And I could also get as much work as I wanted to, because sometimes your employees would limit you and say, “Well, you can’t do as much unless, you know, you take some wage reduction”. So I just felt it was very unfair, the way the system was set up, and I felt that by going and purchasing my own company, it meant an extra – at least an extra $500,000 in my wallet from being able to negotiate better teleradiology deals.

So is that your best explanation of what you meant by “500k in kickback money”?---Yes, that’s exactly what I meant.

73    On 24 February 2014 Mr Connolly sent the following reply to Dr Brecher’s email:

Why don’t you have other choices? It sounds like a big gap in value?

Do you want me to do anything further?

If so give me a call to discuss.

74    Dr Brecher replied to Mr Connolly on 24 February 2014, stating:

Because I’m leaving work here and don’t have a sponsor. I would have to give up the lucrative deal i have with teleradiology which alone will earn me 60-70K a month (i had to give the radiologist I’m working with here about 30K a month in kickbacks to allow me to do teleradiology). My own company can sponsor me so i can continue to do teleradiology work.

75    In cross-examination by counsel for Acorn Lawyers, Dr Brecher explained:

First of all, what was the – where was the practice where you had to give 30k a month in kickbacks to allow you to do teleradiology?---

…

---Okay. Insight Radiology. And my sponsoring – the sponsoring doctor is named [person named], and he was saying – because for me to get – like, when I was sponsored, for example, at Insight Radiology, I would have to have a doctor sponsor me as well, a radiologist, and essentially, for me to get additional work, I would have to have his permission, and he was asking for about $30,000 a month to allow me to do work for this teleradiology company. So you could see that if I was able to earn $1 million a year – like, $100,000 a year, I would have to pay back to him about $30,000 a year, and that was just completely unacceptable to me. So that’s why I had this impetus to leave Insight Radiology. I loved working at Insight Radiology, but I felt the need to get away from it. Even though I didn’t have a sponsor and I may have to go back to the United States, the thought of having to pay kickbacks to me was just something I couldn’t bear.

76    Dr Brecher had earlier been asked questions by Dr Rashid’s counsel in relation to certain dealings with Dr Rashid and given evidence that he would not sign a “Promotional & Co-Management Services Agreement” in August 2015 (discussed below) because he thought it was illegal. He had given the following evidence in relation to that agreement:

I mean, I never once went to any medical practice when any doctor has ever asked for money that their doctors – that their doctors would send. The only time I’ve ever experienced this, in all my years of radiology, is with Dr Rashid. Every other medical practice you go to where you go and market to those places no one has ever asked for money to be repaid to them for patients that they send. To me, it sounded like he was asking for a bribe – a kickback.

77    Dr Brecher was taken by counsel for Acorn Lawyers to what he had said when cross-examined by counsel for Dr Rashid and then gave the following evidence:

Do you see that?---Yes, exactly, and I meant – I mean it, and what I was – meant by this was GPs. I never talked about radiologists, and this happened to me by a radiologist, not a GP, and I wasn’t - - -

So - - -?---And my – I didn’t take the – I didn’t want – I didn’t give the kickbacks and I stopped and I left Insight Radiology over it. So I would not go into anything where someone would take advantage of me – try to get me to get kickbacks or bribes. I don’t do that.

Dr Brecher, your evidence is “every other medical practice”; do you see that?---Yes, “medical practice”, not “radiology practice”. “Medical” means GPs.

And sitting there in that witness box you gave an oath or an undertaking to the court to tell the truth, the whole truth, and nothing but the truth, and do you agree that you have not done that in this case?---No, I definitely did that in this case, and what this says is that I never went to a GP – medical practice where anybody has ever asked me for a kickback or bribe. Okay. That has nothing to do with radiology practice. Radiology is different than GP practices and I was clearly referring to GP practices there.

Dr Brecher, do you agree that you gave that evidence to paint yourself as someone who was conscientious and moral and would not engage in something as nefarious as kickbacks?---I didn’t. I left Insight Radiology because of it, and then I didn’t have anything to do with this other contract. No matter what recital D [of the “Promotional & Co-Management Services Agreement”] has in it, I did not ask for this contract. I didn’t want anything to do with it, and I had it checked by my accountant [Ms Adams] to make sure that it wasn’t a kickback, and she didn’t think it was a kickback or a bribe, and so I signed it based upon her knowledge of cross-promotional agreements. But I left Insight Radiology because of the fact that I did not want to be subject to anything like a kickback or a bribe, and I felt like that was happening there and I left. I also told Medicare about it, so I informed Medicare of what happened. Okay.

Dr Brecher, you were earning between 60 and 70 thousand dollars a month in return for the work that you were doing for Insight?---And I – yes, and I – and I did – not at Insight. That was Global Radiology.

Global?---And I was going to give it up – give up all that money, because I would not be the subject of any crimes, any bribes or any kickbacks, so I gave it up. So when you say that I am moral, I am moral; believe me.

But in saying to this court and to his Honour that, every other medical practice that you go to, no one has ever asked for money to be paid for them – for patients that they send:

It sounded like he was asking for a bribe – a kickback.

?---Well, that - - -

You - - -?---I’m sorry.

- - - misled this court as to your experience with kickbacks, didn’t you?---No, I did not. I said medical practices that send radiology. There’s a difference. Okay. You’re wrong, and if – and if you – you know, I have my lawyers here. You are completely wrong. I said I had never been to a medical practice that sent their doctors to radiology that has asked for kickbacks. I never said anything here about radiologists doing it. This is completely different. This is going – and I’m talking about GPs, medical doctors, going and marketing and saying ..... “If I send you patients, you give me this money back.” What was happening at the radiology practice is completely different, because what was happening there was I was working as a radiologist and, because I wanted additional work, that happened. But this is a completely different situation to me – separate. This is going as a radiologist, marketing to GPs, and a GP, a general practitioner, asking for a kickback. This never happened to me before.

…

In the context of providing evidence in relation to the promotional and co-management services agreement, do you agree that it was misleading for you to suggest that you didn’t want to enter that agreement because you did not want to be involved in something like kickbacks?---No, it was not misleading at all.

78    Dr Brecher was then taken to some other evidence he had given in response to questions from Dr Rashid’s counsel. Dr Brecher had said in the context of that questioning:

Like I said, no other – no other medical practice has ever said that to me or any of our marketers. I never heard of anything like that. So I would have gone to the police had he come to me with this before we had made an agreement to go into business together.

79    The sentence “I never heard of anything like that” was drawn to his attention and Dr Brecher gave the following evidence:

Do you agree that a kickback from a radiology practice is similar to a kickback from – to a medical practice?---No. I said I had never seen anything – heard anything like that from medical practices, not, you know, referring work to a GP – I mean, I’m sorry, referring work to radiology groups. So the GP – I’ve never heard of a GP saying that, you know, “If we send you work we will get” – you know, “You give us a percentage of the money that we’re sending.” That’s what I was referring to. As far as the radiology, that was a different issue. That’s a visa issue, to me. That’s a flaw in the system, I believe, here, and I brought it up with Medicare. It has been reported to Medicare. You could look it up. You could go and ask them if I – you know, investigate that, but I did bring it up with Medicare.

80    Mr Connolly responded to Dr Brecher’s email at [74] above as follows:

I understand, but do you have to buy South Coast Radiology?

Did the immigration lawyer come up with alternative options?

As you have a valuation in hand for South Coast (which has the business being between $500k to $1m below the asking price) would it not make sense to try and get Dr. Stanton to improve his deal, or indeed offer to pay him on an earn out basis (i.e. borrow $1.5m from the bank then pay him the balance of consideration in a years time should the practice continue to do well?).

81    Dr Brecher replied and stated:

Yes, i’m going to try to [do] both but I’m sure I know what the answer will be. Fintan, I can promise you I can turn that practice into a cash cow. Do you know anyone who could negotiate on my behalf with Arthur?

82    Dr Brecher agreed that one of his responses to Mr Connolly’s email at [74] above was to say that “it will be a $5 million practice in a year or two”.

83    Mr Connolly sent an email at 2.09 pm which stated:

You are not buying what you can make of the practice, you are buying what’s there!

I would be happy to try and negotiate. Alternatively, happy to suggest a lawyer. I believe that any negotiation should be done face to face with Dr. Stanton.

84    Dr Brecher replied:

From what I understand Stanton is not willing to budge at all.

85    Mr Connolly replied:

You (or someone working on your behalf) needs to engage directly with Dr. Stanton. If he is unwilling to budge on price, then payment terms might be open to discussion. Also, if it’s a business and assets purchase, the allocation of purchase price needs to be considered.

Some ground for compromise needs to be found in order to try and do a deal.

86    I infer that, at least as at 24 February 2014, Dr Brecher had not retained a lawyer on the purchase of SCXR Dapto. Dr Brecher considered that Dr Stanton would not accept less than $2.5 million for the practice. The contemporaneous material indicates that Dr Brecher had not received the three years of financial material which he and Mr Connolly had sought. Medfin, to Dr Brecher’s knowledge, had valued the business at between $1.5 and $2 million. Dr Brecher’s accountants had not valued the business.

87    When he had earlier been cross-examined by Dr Rashid’s counsel, Dr Brecher had said:

You thought 2.5 million was too much to pay for the business?---Well, it was within the – the estimate. I had an estimate of – of an expert saying that it was between two million at its low end and $2.5 million at its high end …

88    Dr Brecher was taken to this by counsel for Acorn Lawyers and he confirmed that the estimate to which he was referring was not one provided by Crowe Howarth or Mr Connolly. He also agreed it was not provided by Medfin.

89    Dr Brecher was then shown an affidavit sworn in proceedings which had been in the Supreme Court of NSW concerning the administration of SCMI. Dr Rashid was also a party to those proceedings. In that affidavit Dr Brecher had described himself as a “medical practitioner, specialising in radiology”. This sits uneasily with his evidence that “‘medical’ means GPs” – see [77] above. Dr Brecher was taken to [16] of that affidavit where he stated:

I instructed my accountants to prepare a valuation for SCXR. At the time, my accountants were Crowe Howarth. At this time, SCXR was generating a revenue of approximately $1,200,000.00 per year. Of this, the profit was approximately $400,000.00 per year. My accountants valued the practice at between $2,000,000.00 and $2,500,000.00. At Tab 5 of the Exhibit is a true copy of the business valuation from Accounting Professionals (NSW) Pty Ltd, dated 16 April 2014.

90    Dr Brecher gave the following evidence:

And you were saying in your evidence on oath that Crowe Horwath had valued the practice at between 2 million and 2.5 million dollars, weren’t you?---Yes. If I’m incorrect about something, I don’t know if that constitutes perjury. I was just incorrect, but the fact is that there was a valuation of it for 2 to 2.5 million dollars. I was erroneous. I apologise for the mistake.

Well, it’s just plain wrong, isn’t it, Dr Brecher?---No, because I don’t see any reason – I wouldn’t lie about it, you know. I mean, there’s no benefit for me to lie about how [who] valuated it. I don’t care if Crowe Horwath evaluated it or anyone else evaluated it. Like I said, it has to be established evidence that, you know, the purchase price was based upon a valuation of 2 to 2.5 million dollars, and when I wrote this – or I swore this, I made an honest mistake, and honest mistakes I don’t believe are anything like perjury. But it’s up to his Honour to make that determination. I apologise.

Do you agree that you were careless as to the truth of the statements that you were making under oath?---No, I’m not careless at all. I try my best to make very accurate statements, and in this case, I agree with you that there’s an error. It was an honest error.

And do you agree that the statement that you made, whether honest or deliberate, was misleading?---It could be constituted as misleading, yes.

And it does matter, doesn’t it, Dr Brecher, who you say performed valuations when you’re trying to give credence to the valuation you’re putting forth for a practice that you’re suing in relation to, doesn’t it?---I don’t think so. I think that, you know, the – what I was saying was that it – there was an independent valuation, which I think is the best type of valuation, not one that’s done by – you know, has anyone who has conflicts of interest; someone who’s independent. And that was the valuation of 2 to 2.5 million dollars. I just made a mistake that it was done by my accountants. It wasn’t done by my accountants. And that’s all there is, I believe, to it, because it was just an honest mistake. It doesn’t favour me. It doesn’t – I don’t know why I would write this if I didn’t believe that it was true.

And do you say that that valuation of 2 to 2.5 million dollars was independent of you?---Yes. I didn’t have anything to do with the valuation.

Nothing to do with that valuation?---I don’t believe so. I asked for an independent, honest valuation of the company, and this is the valuation, I believe, that was given. I didn’t have any – I don’t ever lie or do any of that, you know, stuff. I want – when I bought that business, I wanted someone to give me an independent, thorough evaluation, and that’s all I asked for.

91    The independent valuation to which Dr Brecher referred in his evidence was one prepared by Garry Pinch of Accounting Professionals (NSW) Pty Ltd, which Mr Pinch sent to Mr Fraser of Medfin on 26 February 2014. It was prepared at the request of Dr Brecher. It will be recalled that Medfin was previously only satisfied that the value of SCXR Dapto was between $1.5 and $2 million. Mr Pinch’s valuation was a “calculation engagement” not a “valuation engagement” – cf: APES 225 Valuation Services, issued by the Accounting Professional & Ethical Standards Board. A “calculation engagement” is more confined than a “valuation engagement”. The valuation report included:

1.    Scope and Purpose of the Valuation.

You have requested that we determine the indicative Fair Market Value of the business of South Coast X-Ray, as at the 26th February 2014. In accordance with the terms of our engagement letter and the requirements of the professional standard APES 225 “Valuation Services”, we have undertaken our work as a Calculation Engagement.

A Calculation Engagement means “an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Member and the Client or Employer agree on the Valuation Approaches, Valuation Methods and Valuation Procedures the Member will employ. A Calculation Engagement generally does not include all of the Valuation Procedures required for a Valuation Engagement or a Limited Scope Valuation Engagement”.

92    Under a “valuation engagement” the valuer is free to employ the valuation approaches, valuation methods, and valuation procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the engagement or assignment available to the valuer at the time.

93    The valuation report stated that the valuation had been requested by Dr Brecher “to assist him in purchasing the [SCXR Dapto] business and to provide an independent opinion on the value of the business”.

94    The valuation contained extensive disclaimers. One reflected that it should not be relied upon for the purposes of obtaining funding for the business:

Specifically, this valuation must not be used to attract or induce other parties to purchase, invest in or lend funds to the business.

95    The valuation noted that it relied on unaudited information provided by the vendor and that the valuer did “not warrant that our enquiries have revealed all matters relevant to the valuation”. It stated:

The preparation of this report relies on a level of financial forecasting. Such forecasting requires an estimate of future financial performance and position. In doing so we do not in any way warrant the accuracy of this forecast or that actual results achieved by South Coast X-Ray will meet this forecast. By their very nature future forecasts can be impacted by a wide range of events, which cannot be identified in advance of their occurrence. Such financial forecasts are not capable of independent substantiation or verification. As such it is not possible to warrant the accuracy of the conclusions arrived at in the valuation opinion.

96    The valuation included a discounted cash flow analysis for the years 2014 to 2018 inclusive. It contained a number of assumptions. Dr Brecher stated that he assumed that the information for the assumptions came from him. I conclude it is more likely than not that the information did come from Dr Brecher, including information which was used to forecast future turnover. The assumptions included:

1.     The business is to be valued on a going concern basis.

2.     Assets are recorded at their fair market value.

3.     The financial statements of the business and as provided to us reflect a full and complete disclosure of the financial operation and position of the business. No material events have occurred since the issue of the accounts to the 30th June 2013 that could impact business performance or considerations relevant in assessing business value and the books and records as maintained by the business up to 28th February 2014 reflect a full and complete disclosure of the financial operation and position of the business in the absence of the issue of formal accounts.

4.     The business has made significant investment in establishment costs and the development of brand and market presence. The nature of this investment will be returned over future years and be reflected in the value of goodwill.

…

11.     The business will not require any significant investment in replacement or new assets to achieve the required income forecasts, except for a new Ultrasound machine and replacement of the magnets for the MRI machine. These have been included at values of $120,000 and $200,000 respectively.

…

14.     Revenue will increase on average by 5.2% per annum and overheads will increase on average by 2.9% throughout the forward forecast period. Operational expenditure and capital expenditure are not anticipated to increase above these percentage increases, except for the allowed capital acquisitions listed at assumption 11.

15.     The business will continue to operate from the existing premises during the next five years without the need for any significant capital improvements to the premises.

…

19.     If a Valuation Engagement had been performed under APES 225 rather than a Calculation Engagement, the results of this valuation calculation may have been different.

97    The nineteenth assumption is, of course, a statement of the obvious as opposed to an assumption. It necessarily follows that a valuer who is free to use such methods and make such inquiries as he or she considers appropriate might reach a different conclusion to a valuer retained under a “calculation engagement” of the kind Dr Brecher chose.

98    By 26 February 2014, Dr Brecher still had not obtained legal representation in relation to the potential purchase of SCXR Dapto. On 26 February 2014, he requested the contact details of a lawyer from Ms Maslanka, who was then the SCXR Dapto practice manager for Dr Stanton:

Can I please have the number of the lawyer Michael recommends? Also can you please send me the options I have in terms of the contract you discussed earlier on the phone with me?

99    Ms Maslanka responded at 9.14 pm on 26 February 2014, stating:

The company Michael recommends is Hanson Lawyers in Wollongong they are a well established local firm. The contact there who Michael has worked with previously is Anne Woods her contact number is [telephone number].

It would be good for you to get some advice on your options regarding the purchase as you need to chose [sic] the option that is best for you.

The option that would provide the smoothest transition would be for your company to buy 100% of the Southcoast Xray shares, taking over control of Southcoast Xray. Southcoast Xray would then just continue to operate as is now. That is what I have been led to believe.

The other option would be that you buy the company name? Then commence operation under that name?

As far as I am aware we don’t have any liabilities or problems that I can see arising that you would be liable for, though I’m not a lawyer so I don’t know how this all works.

Arthur is keen to move forward with a heads of agreement, confirming your intention to purchase Southcoast Xray, however he wants you to seek advise [sic] on what is best for you, he doesn’t want to influence your decision one way or the other on which option you would like to chose [sic]. Because in the long run the correct adjustments will be made for billings that are outstanding, staff entitlements etc.

Let me know your thoughts.

100    Dr Brecher forwarded this email to Mr Connolly on 26 February 2014, and requested his advice on the available options:

Can I please get your advice on which way you think I should go? I can’t definitively remember what advice you gave me in the past. So sorry.

101    On 27 February 2014 Mr Connolly wrote to Dr Brecher (emphasis in original):

While it is a question ultimately for your lawyer (and you need to ensure that you get a lawyer who is independent of the seller and has experience in acting for purchasers of businesses – happy to recommend one if you don’t have one), the general rule is that where you buy shares in a company, you take over all the assets as well as liabilities of that entity.

For a company such as South Coast XRay that has been around for many years, it could have significant/historic liabilities, tax problems, employee claims, patient claims etc.

However, it is difficult to form a clear view in terms of what risks might be there, as we never saw reliable financial information on this company. So in principal my personal view is that a “business and asset purchase” where you set up a new entity and acquire the business and assets of South Coast XRay would be preferred from a risk perspective. The issues with a “business and asset purchase” as against a share purchase are that the employees, registrations, immigration registrations, company name, bank account etc will all need to be transferred to set up again. I believe that the bank can work with either option, but should be consulted.

102    On 4 March 2014, Dr Brecher wrote an email to Mr Fraser stating:

I hope you’re well. I’ve been working at Dapto now for two days and have to say it’s the most inefficient practice I’ve ever worked at. It will take I believe a significant investment above the 2.5 million to get it running efficiently. I’m reconsidering purchasing the practice.

103    Dr Brecher indicated that “a significant investment” meant more than the additional expenditure that had been assumed on the basis of information provided by Dr Brecher in Mr Pinch’s valuation report.

104    Dr Brecher’s evidence as to his reliance on Mr Pinch’s valuation report was overstated:

And I suggest to you, Dr Brecher, that, in fact, you obtained that valuation purely for the purposes of obtaining a Medfin loan in the full amount of the purchase price?---No. That’s not true. I mean, I always – like – like I’ve said in my affidavit and my testimony, I always took a very pessimistic view, as well, of life, and that’s why I was rushing to open up a second radiology practice, but I was going in dumb. I looked at the worst case scenarios and that’s what I focused on. So this was a very important report for me. This is what I really based things on, an expert. I’m not an expert. I’ve never run my own radiology practice before. I had my – you know, I believed, you know, there were some things that I could do with it. I believed that I could get the revenue up, but I wasn’t certain of that. I had to rely on this report.

105    I make the following findings and draw the following inferences concerning the valuation and Dr Brecher’s evidence referred to above:

(1)    I conclude that the predominant purpose of Dr Brecher obtaining Mr Pinch’s valuation was to secure finance for the purchase of SCXR Dapto from Medfin.

(2)    Dr Brecher was involved in the valuation process to a greater extent than he was initially prepared to accept in cross-examination. Dr Brecher engaged the valuer under a “calculation engagement”. Under such an engagement, the valuer employed a methodology that was agreed upon by himself and Dr Brecher. Dr Brecher provided information which was the basis of many of the assumptions made in the valuation. It is more likely than not that Dr Brecher provided information to the valuer with respect to turnover, commencing with $2.55 million in 2014. SCXR Dapto’s actual turnover at the time was around $1.9 million.

(3)    At the time of the report, Dr Brecher considered that one ultrasound machine required replacement and that it was desirable that the CT scanner be replaced. Dr Brecher wanted the practice to be refurbished. This involved more expenditure than was disclosed in the assumptions in the valuation.

(4)    Dr Brecher engaged the valuer because Medfin was only satisfied that the business had a value of between $1.5 and $2 million and Dr Brecher wanted to convince Medfin otherwise in order to obtain a greater level of finance. I do not accept that Dr Brecher ever genuinely believed that the true value of SCXR Dapto as at the date of purchase was between $2 and $2.5 million. Although Dr Brecher denied that he did not rely on the valuation as indicating the true value, I do not accept that denial. Dr Brecher thought he could turn the practice into something of value; but that is very different to genuinely considering that the market value of the practice was in fact between $2 and $2.5 million.

(5)    Dr Brecher knew he was paying too much for SCXR Dapto, but he did not care because he considered he would be able to turn the business into something better.

106    By 13 March 2014, Dr Brecher had retained Mr Roger Downs of Kells to act for him in relation to the purchase of SCXR Dapto. A draft of the contract for sale had already been prepared by this time and provided to Medfin.

107    On 24 March 2014 EBPL, as trustee of the SCXR Unit Trust, signed the contract for purchase of SCXR Dapto for $2.5 million, with a completion date of 31 March 2014. The contract was, however, not exchanged. Dr Brecher’s solicitor, Mr Roger Downs, advised Dr Brecher that formal lease transfers should be obtained before settlement of the contract. However, Dr Brecher spoke to Dr Stanton and agreed that he would accept letters from the relevant lessors about appropriate lease variations, with the formalities to be completed by the vendor’s solicitors, Access Law Group, or Mr Downs of Kells.

108    On 25 March 2014, Mr Fraser from Medfin wrote an email to Dr Brecher telling him that he had already started the process for extending the finance approval and to “take your time and get this done correctly”.

109    Mr Fraser and Dr Brecher met on 27 March 2014 and Dr Brecher executed the Medfin loan documentation. This included executing the Goodwill Loan for EBPL as trustee for the SCXR Unit Trust. Dr Brecher also executed the agreement as guarantor. Mr Fraser witnessed Dr Brecher’s execution of the document. Immediately above where he executed as guarantor, the agreement stated a number of matters under the heading “IMPORTANT”, including:

The guarantor should obtain independent legal and financial advice.

110    Dr Brecher was asked about providing this guarantee by Dr Rashid’s counsel and he stated that he had legal advice at the time. His evidence was:

You didn’t get legal advice, did you?---No, I did get legal advice.

About the guarantee?---Yes.

Who did you get the advice from?--- From Kells Lawyers.

You got no such advice, Doctor?---Why – why would you say that in - - -

I want to suggest to you, you got no such advice?---I had – Roger Downs was my lawyer when I was getting the Medfin loan, so I had legal representation, and he was helping me through the entire process, because, you know, this is the first purchase of a business that I’ve ever had, so I was unfamiliar with the entire process.

And he was, you say – I withdraw that. He was your lawyer?---Yes, Roger Downs from Kells Lawyers.

And that was important to you?---It was very important to me to have a lawyer.

You needed a lawyer to secure your interests?---Yes.

111    Dr Brecher’s evidence that he had advice from Kells Lawyers about the guarantee was not correct. He signed the relevant documents with Mr Fraser. There is no contemporaneous document which suggests he received any advice from Mr Downs in relation to the Goodwill Loan and associated guarantee.

112    Dr Brecher was referred to the evidence set out above by counsel for Acorn Lawyers. Dr Brecher then gave the following evidence:

And then there’s a reference to the guarantee. And then, at line 14, Mr George [counsel for Dr Rashid] said:

I want to suggest to you: you got no such advice?

And you responded:

I had – Roger Downs was my lawyer when I was getting the Medfin loan. So I had legal representation and he was helping me through the entire process because, you know, this was the first purchase of a business I’ve ever had.

Do you see that?---Yes.

Continuing:

And I was unfamiliar with the entire process.

?---Yes.

Now, that was wrong, that statement, wasn’t it?---No. Why is it wrong?

It was wrong in two respects: the first one being Mr Downs was not your lawyer advising you on the Medfin loan, was he?---I don’t know. I mean, I said to you I don’t recall whether or not he was.

And he was not helping you through the entire process, was he?---He helped me through the entire legal process.

Dr Brecher, he wasn’t even your lawyer when you signed the contract?---I meant legal process when I was talking about this – when I said that. When - - -

You don’t regard signing a contract as a legal process?---A contract is a legal process, yes.

And is it your evidence that you don’t regard signing a contract as a legal process?---A loan. I said that, you know, loans, I don’t regard as legal, but this I regarded as legal, and he did advise me during the entire – the legal process.

And I put to you that Mr Downs was not your lawyer helping you throughout the entire process because he wasn’t even your lawyer at the time that you signed the contract for sale, was he?---I can’t recall.

113    In the evening of 27 March 2014, Dr Brecher sent an email to Mr Fraser saying he was having a crisis. In cross-examination, Dr Brecher stated that he could not recall what the crisis was. I do not accept that he could not recall. The events, described below, are such that it is unlikely that they would not be recalled.

114    On 28 March 2014, Access Law Group (which acted for Dr Stanton) wrote an email directly to Dr Brecher noting that Dr Brecher was coming to see Mr Tom Ellicott, a lawyer who worked at the Wollongong office of Access Law Group, at 3.30 pm that day and attaching a copy of the contract. The email stated that Access Law Group was providing a copy of the contract from their file “as Kells have your signed copy”. The email then stated:

Tom Ellicott will go through the contract with you this afternoon to sign and exchange and go through the procedure for settlement.

115    Dr Brecher was asked, in cross-examination, whether this email was written because he no longer had a solicitor who was acting for him, namely Mr Downs of Kells. He stated that he could not recall. I do not accept that was truthful. He gave the following evidence:

Can you recall, Dr Brecher, why it was that you were not able to get the signed contract from Kells Lawyers?---No. I made – I’m not sure if I insulted Roger Downs or – I’m not sure. Maybe I was delinquent in my payments. I’m not sure why I wasn’t able to get it.

…

Do you see that?---Yes. It – yes, it seems like, you know, the contract I signed with Roger Downs will be re-signed with Tom Ellicott.

That’s correct?---Yes.

And why is it that Tom Ellicott would be going through the procedure for settlement and signing and exchanging the contract with you and not Roger Downs?---I don’t know.

Can I suggest a reason to you for why that might be the case?---Yes.

Dr Brecher, you sacked Roger Downs as your lawyer, didn’t you?---No.

…

Turning back to A70, Dr Brecher, can I put it to you that at 10.40 pm, when you called up or when you emailed Mr Fraser of Medfin saying that you have a crisis and thereafter had a conversation with him, which I assume from the email, you said to Andrew Fraser, “I want to proceed with exchange and completion of the sale as soon as possible, but my lawyer is holding me up”?---I can’t recall what I said to him. I have no recollection.

And you discussed with Mr Fraser at that time how it is that you could proceed without the interference of your lawyer, in terms of the two-week settlement period?---No. I can’t recall. That’s speculation.

And, having had that discussion with Mr Fraser from Medfin, you called up Access Lawyers and you informed them that Mr Downs was no longer your lawyer, didn’t you?---I can’t recall and it’s just speculation.

And further to that telephone call Ms Gabriella Virtu … sent you this email on 28 March with arrangements for you to come directly to their offices, didn’t she?---I can’t recall. I really haven’t reviewed these documents and on purpose. I don’t want to – I don’t even want to address these issues. I mean, I feel as if you’re – you’re blaming me for something, a victim, and everything here was done properly.

116    I do not accept Dr Brecher’s evidence that had forgotten why Mr Ellicott from Access Law Group and not Mr Downs would be going through the procedure for settlement and signing and exchanging the contract with Dr Brecher. Dr Brecher’s professed lack of recollection about this topic stood in stark contrast to his often adamantly expressed clear recollection of other events around this time.

117    Earlier in his cross-examination, Dr Brecher insisted that Mr Downs resigned because he had a pre-existing dispute with Dr Stanton. This evidence was misleading in light of the true facts. Dr Brecher was taken to the contract and it was pointed out that it did not identify a solicitor acting for him. Dr Brecher stated:

and there is nothing listed?---Yes, because what – what happened – and I can explain this to the judge – that Roger Downs had a long-standing dispute with the person who assigned their business to me, Arthur Stanton – and everything was complete. But because of this personal animus that the two had, Roger Downs didn’t want to deal with the – with Dr Stanton. They were having, you know, a tiff between them, so he resigned. And it was already done; the contract had been completed. So I just went to Access Law Group to sign what I had done with Dr – with Roger Downs. But Roger Downs did 100 per cent of the contract for me, and all that was missing was just the signature at the – at the bottom.

Let me unpack that, Dr Brecher. Is it your evidence that as at the completion date, 31 March 2014, Roger Downs was not your solicitor?---No, he – he had, you know, stopped right after the contract. The contract was – was completed, and then he didn’t want to deal with Arthur Stanton anymore, and the two of them were having, like – in a dispute that had nothing to do with my contract, and Dr – I mean, Roger Downs was very upset about it, I believe, and he just resigned and left me with just the final contract, and what I was did was just go over to Access Law Group just to finish it – just to complete it. It was done.

Dr Brecher, are you saying that your lawyer resigned from acting on the purchase of a business because he couldn’t deal with the purchaser, notwithstanding that the purchaser had his own solicitor – the vendor had his own solicitors?---Yes, it was a personal issue between Roger Downs and Arthur Stanton, and I think you could ask Arthur Stanton about it. I’m happy for you to, you know, go to him, and he will tell you that he did have this issue with Roger Downs. There may be emails between Arthur Stanton and myself about his, you know – this personal animus that the two people had, but it seemed to me as if – I mean, the contract was already done – it was done – and he – he did that at the last second.

118    Dr Brecher also gave this evidence:

Dr Brecher, is it your evidence now that Mr Downs was your lawyer as at 31 March 2014?---Like I said, it’s – I don’t know if he was or not, because the fact is: is that he went and – what I had – the document was all created ..... Mr Downs. It was 100 per cent finalised, it was done, and it just needed to be signed and because – I believe he had a – it felt like he had a conflict of interest with Arthur Stanton, he didn’t want to be across the room from him to sign it, that he withdrew and I took the – I paid the – I paid for the services, thanked him, took the completed document over to Access Law Group and signed it. But it was a finalised document so I’m not sure whether or not, you know, he was still my lawyer at that time. I mean, he withdrew, but, at the same time, I had a final document and it was just waiting to be signed.

Your evidence yesterday was that Mr Downs resigned because of a tiff that he had with Dr Stanton; do you recall giving that evidence?---Yes, exactly right. He and Dr Stanton didn’t get along and then, as this – the whole thing was progressing, I mean, in terms of going back between the lawyers for several months, that, I think, the animus built up and built up and built up to a point where he was – he felt conflicted out and he gave me a final draft and said, “Okay, you go and sign it. I don’t want to be, you know, party to it.” But it was finalised. It was a final document. It wasn’t – you know, I mean, to suggest that this document wasn’t completed would be erroneous. It was a complete fully realised document – contract.

So you’ve indicated that he told you that he had a conflict of interest; is that correct?---Yes, that was my understanding. That he had a conflict of interest with Arthur Stanton and he withdrew. I don’t have an issue with that. I mean, I was given a completed finalised document. It was all created by Arthur Downs – I mean, Arthur – I’m sorry, Roger Downs. There was no issues with it. It was just ready to be signed. So it just needed a signature on it.

…

So does that mean that he had withdrawn, by the latest, 27 March 2014?---I can’t recall exactly when he did it. But I – what I remember is just – you know, is that knowing that, you know, the contract was ready to be signed, we were waiting – you know, we were – we had a date for it to be signed and at the very last second he withdrew. And it was my understanding that he withdrew because of the fact that he had a conflict of interest with Arthur Stanton. And that was it. It was a finalised contract. So it was worked on for three months and everything was done properly with the contract and I took a finalised contract that he drew up to be signed on the date that we were supposed to sign it.

119    Early in his cross-examination Dr Brecher stated:

Yes?---But I just recall Roger Downs doing so much work on this – in this – in this matter – very excellent work.

…

Yes?---Dr – Mr Downs didn’t muck around. He was a very intelligent lawyer. I mean, he was very, very thorough and I liked that. He was very thorough.

…

And it appears that as at this date, 21 March 2014, just over a week after you’ve engaged him, he has identified a number of issues that need resolving; do you agree with that?---Yes. He was superb. Yes.

120    None of these comments as to the impressiveness of Mr Downs were responsive to the questions being put in cross-examination. Dr Brecher’s enthusiasm in cross-examination for Mr Downs’ ability and work stood in stark contrast to three emails Dr Brecher wrote to Mr Downs on 28 March 2014 in response to Mr Downs stating that he could no longer act for Dr Brecher. Mr Downs’ email stated:

I refer to my position as foreshadowed in my telephone conversation and emails last night.

In the circumstances I do not consider myself to be properly instructed and that you as a client are not accepting my advice. Sadly I must terminate the retainer.

I am disappointed that it needs to end this way, but my professional obligations are quite clear.

I can make the file and other documents available to you today to enable you to instruct another lawyer or take such action as you wish.

In the circumstances I will need to exercise a lien over the file in respect of my costs. I will not be able to arrange a formal review of costs and tax invoice today, but to assist you in a quick transition I am prepared to release the file on payment into my trust account of $15,000 in cleared funds on the basis that it will be retained in trust until I am able to provide you with a proper tax invoice.

121    In an email sent on 28 March 2014, Dr Brecher responded:

There will be no payment to you and I will sue you over your unethical behaviour.

122    In a second email sent on 28 March 2014, Dr Brecher responded:

You have single handedly ruined this transaction and I will immediately sue you and Kells for your dishonest and disgenuine behaviour. You are a truly unethical and greedy person.

123    Dr Brecher wrote a third email on 28 March 2014 accusing Mr Downs of acting unethically and trying to “sabotage the deal”.

124    Towards the end of his cross-examination by counsel for Acorn Lawyers, Dr Brecher was taken to his earlier description of Mr Downs’ work as “superb” and “excellent” and a statement made by Dr Brecher that “as a client, I was happy, and he [Mr Downs] did a great job with it”. The following exchange then took place:

They were all lies, weren’t they, Dr Brecher?---No, they weren’t lies. That’s not a lie, and that’s perjury and his Honour could put me in jail for that. They were not lies. He did a great job and at the very end, because of his personal animus against Arthur Stanton, for some reason related to two variances of leases that Arthur Stanton did – already gave indemnity to – and Tom Ellicott – you could call him as a witness, and maybe will call him as a witness, and he would confirm what I’m saying. He withdrew for no reason, okay? It doesn’t mean that he didn’t do a great job in the case. He did. He did a wonderful job. I was so happy with him. He did an amazing job for me in this place.

…

You called Mr Downs unethical, dishonest, disingenuous, greedy – are they the terms you usually apply to someone you genuinely think is a superb lawyer?---Yes, because they’re not mutually exclusive. Your Honour, he was a great lawyer – excellent, but, at the time same, I was – felt very, you know, like, left in the lurch by him at the very last second. That’s what I’m describing there as being dishonest, you know, and I was lashing out at him, because I have never been dropped by a lawyer, and I felt like he shouldn’t have dropped me as a client, because the fact that – over something like this – this trivial issue.

Can I ask that you turn to - - -?---And I thought it was unethical for him to just leave me at the last second when one contract was already – the contract was already signed be [by] me. It was already signed under his eyes – own eyes. The contract was fully realised. It was signed, and he just dropped me as a client because he was upset with Arthur Stanton. I thought that was unethical to abandon me at the last minute like that. But it doesn’t meant that he wasn’t a superb lawyer. You could be a great lawyer and do something, you know, that upsets me.

And, as you say, he dropped you at the last minute?---Yes, and yesterday you told me under – you said this to me, and I looked his Honour in the eyes, and you said, “You dropped him as a client, because you wanted to sign the contract”. No, Dr Stanton wanted to sign right away. I didn’t. Just like Mr Mohamad Rashid wanted that contract signed the night of October 15, not me. So you accused me yesterday of wanting to sign this contract when, in fact, it was Dr Stanton who was pressuring me to sign the contract. I was happy to wait two weeks, okay? And I told his Honour – looked him right in the eye and I said, “I did not drop him as a client – as a lawyer. I did not fire him”, and that was true. He abandoned me at the last minute when the contract was already signed. There was nothing to be done with the contract. Arthur Stanton already agreed to what Roger Downs wanted, so why drop me as a client? I don’t get it.

But he kept that contract that you had signed, and you had to sign another one, didn’t you?---Yes, because I – the same as that contract that I signed, he gave me the $15,000. He gave me the contract, and I walked it across the street and I signed the exact contract that I already signed. Nothing was done unethical here. I listened to everything that he ever said to me. There was no advice that ever rejected by him. All that happened at the end was that, for some reason, he just abandoned his client at the last minute, and that led me to lash out at him, and when I lash out at people, I say terrible things something that I don’t even mean, and then I regret them, but I was upset, and those were emotional words, but would I ever use Roger Downs as a lawyer again? Of course I would. He was a great lawyer. He was great and superb. He did a wonderful job for me, and I listened to him, and, once again, like I said, I was the one who was being pressured at this time, not, you know – Arthur Stanton wanted the contract signed. I didn’t want the contract signed. I was willing to wait another two weeks – same as with Dr Rashid. I could have waited.

125    In closing written submissions, it was submitted by counsel for Dr Brecher that Dr Brecher’s evidence as a whole was “incorrect in some regards”. It was accepted, by way of example, that he “was appropriately tested on his dealings with Mr Downs”. It was submitted that the cross-examination of Dr Brecher on this issue was “peripheral to the critical issues in dispute”. Whilst it is true that the cross-examination on this topic was not on the central issues in dispute, I do not regard the cross-examination of Dr Brecher about his purchase of SCXR Dapto as “peripheral”. It is relevant in a number of ways:

(1)    First, Dr Brecher’s purchase of SCXR Dapto for the amount paid and its subsequent performance informs why Dr Brecher was desperate to enter into the critical transactions with Dr Rashid and associated entities.

(2)    Secondly, his desperation to enter into the purchase of SCXR Dapto, in the context of the advice being given to him and the circumstances, and to do so without an independent lawyer representing his interests, is consistent with his actions in entering into the critical transactions in the way he did.

(3)    Thirdly, Dr Brecher’s evidence in respect of the purchase of SCXR Dapto demonstrated that he was prepared to mislead where he considered that it suited his interests.

(4)    Fourthly, the parties were in dispute as to who suggested a merger of interests between Dr Brecher and Dr Rashid – that is, who first suggested that each of them would have an interest in both SCXR Dapto and the new radiology practice at Barrack Heights. Dr Brecher’s case was that the first he heard of such a proposal was when it was suggested by Dr Rashid when Dr Rashid gave him a “mud map” in September 2015. Dr Rashid said the idea came from Dr Brecher at an earlier meeting. It came out in Dr Brecher’s cross-examination in relation to the purchase of SCXR Dapto that a similar idea was something Dr Brecher had previously considered in relation to, and evidently discussed with, Dr Pham – see [66] to [68] above. When asked questions about the possibility that each of Dr Pham and Dr Brecher might “get a portion of” each other’s companies, Dr Brecher said that he had always planned to increase his footprint. The fact that Dr Brecher had previously considered the possibility of the arrangement with Dr Pham makes it more likely that Dr Brecher introduced the idea of a merger, than if he had never previously considered the possibility. I conclude below, independently of this consideration, that it was Dr Brecher who raised the idea of a merger with Dr Rashid.

126    The contract for the purchase of SCXR Dapto was exchanged on 28 March 2014. It was completed on 31 March 2014. The purchase price was apportioned in the contract as follows:

(1)    Goodwill: $860,000;

(2)    Equipment (Schedule 1): $1,245,000;

(3)    Equipment (Schedule 2): $395,000.

127    The purchase was financed in the following way:

(1)    A “Goodwill Loan” from Medfin to EBPL as trustee for the SCXR Unit Trust of $860,000. This was to be repaid by 120 monthly instalments of $10,964.05. Dr Brecher guaranteed the loan.

(2)    A “Lease Agreement” from Medfin to EBPL as trustee for the SCXR Unit Trust. Dr Brecher provided a guarantee, with a limit of $1,678,568.16 reflecting the total repayments due under the Lease Agreement, as follows:

    $10,000 per month for 12 months (payments 1 to 12), a total of $120,000;

    $27,282.67 per month for 47 months (payments 13 to 59), a total of $1,282,285.49;

    $276,282.67 for one month (payment 60).

(3)    Dr Brecher paid an amount of $200,000 towards the purchase price. EBPL paid an amount of $195,000.

128    In addition to the purchase price, SCXR Dapto had other expenses and liabilities:

(1)    On 27 June 2014, EBPL entered into an operating lease with GE Commercial in relation to a GE Optima CT660 P2.5. This required 60 monthly payments of $9,020.02.

(2)    On 27 June 2014, EBPL entered into an operating lease with GE Commercial in relation to a piece of radiological equipment. This required 39 monthly payments of $2,220.90 and one instalment of $2,220.94.

(3)    A loan of $200,000 from Dr Brecher to EBPL as trustee of the SCXR Unit Trust.

(4)    A loan of $195,000 from EBPL.

(5)    EBPL entered into two “Chattel Mortgage – Fixed Rate Loans” with BOQ, expressed to be for the purpose of assisting “the purchase of medical equipment” and “the purchase of new ultrasound and renovations” respectively:

(a)    a loan entered into on 12 January 2015 for $98,121.10 (60 repayments of $1,944.14 per month);

(b)    a loan entered into on 2 June 2015 for $273,870.49 (60 repayments of $5,313.67 per month).

(6)    EBPL entered into leases of the premises. In the 2014-2015 financial year, rent totalled $138,128.51.

129    After the purchase of SCXR Dapto, Dr Brecher continued to report cases for Insight Radiology Pty Ltd and Global Radiology doing tele-reporting. The revenue he generated from this tele-reporting was deposited into an account of EBPL. Dr Brecher earned $978,083.25 from tele-reporting for Insight Radiology and Global Radiology and locum activities in the period from 22 February 2014 to 30 June 2015.

130    From the time of Dr Brecher’s purchase of SCXR Dapto until around Christmas 2014, SCXR Dapto employed Mr Le Roux as the radiologist. Dr Brecher continued to undertake locum work and teleradiography work for other radiology practices. Dr Brecher began working at SCXR in around January 2015. He ceased reporting for Global Radiology in around April 2015. In his first affidavit, Dr Brecher stated that he ceased reporting for Insight Radiology in around June 2015. He also stated that he continued working as a locum past June 2015, although his “principal focus” from this time was providing radiological services to SCXR Dapto. In an affidavit sworn on 26 August 2019, shortly before the hearing commenced, Dr Brecher referred to invoices which revealed that he continued tele-reporting for Insight Radiology in July 2015 and throughout the relevant events including after entering into the SCMI transaction.

D.2    March 2015: Dr Rashid and the radiology area at Barrack Heights

131    Up until this point in time there had been no dealings between Dr Brecher and Dr Rashid.

132    Dr Rashid had, through Barrack Investments, leased a part of CHC Barrack Heights to PRP Diagnostic Imaging Pty Ltd, as a radiology practice. PRP had been a tenant for a number of years. There had also been a radiology practice at Barrack Heights before PRP. PRP vacated the premises it leased around December 2014 and made good the premises by January 2015.

133    Dr Rashid was contemplating that Barrack Investments lease a part of CHC Barrack Heights to Primary, through its subsidiary Healthcare Imaging, for the purposes of Healthcare Imaging opening a radiology practice. The area to be leased included the area which had been leased to PRP. At the time, Primary was leasing an area immediately next to the Radiology Area where it carried on a business of providing nuclear medicine and pathology services. Dr Rashid understood that Primary operated a large number of radiology and diagnostic practices around Australia. Dr Rashid had a high opinion of Primary. He considered that Primary had been a good tenant.

134    On 31 March 2015, Healthcare Imaging offered to lease the Radiology Area for an annual rent of $275,000 for a 5 year term with three 5 year options. Healthcare Imaging was to be responsible for the fit-out. Mr Matt Ayers, the National Business Development Manager of Healthcare Imaging, sent an email to Dr Rashid on 31 March 2015 which included:

Hi Dr Rashid, thanks again for meeting with me regarding the proposed Radiology practice at Barrack Heights. Healthcare Imaging Services remain interested in the proposed Imaging space as defined by you in the document labelled “Preliminary Concept” drawing number B-2.1.

Our best and final offer for rent on this approx. space of 420sqm is $275,000 per annum. We would be happy with a 5 year lease, with 3x5 year options.

If you can let me know if you agree to these terms, we can put together a heads of agreement so both parties can progress.

135    Dr Rashid gave evidence that Healthcare Imaging pursued its offer over the next few weeks but that he did not accept the offer because he was considering whether or not he would himself start a radiology practice in the Radiology Area.

D.3    May 2015: Ms Hyratt sees an opportunity for SCXR Dapto at Barrack Heights

136    One aspect of Ms Hyratt’s employment at SCXR Dapto was to market SCXR Dapto to general practitioners and medical centres which might be a source of work. She did this by visiting medical centres in the area.

137    On 7 May 2015, Ms Hyratt visited CHC Barrack Heights. After her visit she sent a Facebook message to Dr Brecher which stated:

Renee Traish Thursday, May 7, 2015 at 4:27pm UTC+10

Jun and I visited barrack heights medical centre. They have 600 patients a day! This is where PRP moved from. There could be an opportunity there to open a new radiology practice. I’ve been give. The owners number.

138    Ms Hyratt also stated to Dr Brecher that she would contact the owner the next day.

139    Ms Hyratt’s Facebook message is consistent with Dr Rashid’s recollection of a conversation with a receptionist at Barrack Heights who had told Dr Rashid that Ms Hyratt had attended CHC Barrack Heights, and that the receptionist informed Ms Hyratt that Dr Rashid was the owner of CHC Barrack Heights.

140    Ms Hyratt spoke to Dr Rashid on 9 May 2015. Dr Rashid’s recollection of the conversation was that Ms Hyratt said she worked at SCXR Dapto and that Dr Brecher was the owner. She said Dr Brecher was a radiologist from the USA and that they wanted to promote SCXR Dapto at Barrack Heights. Dr Rashid recalled that Ms Hyratt asked Dr Rashid to visit SCXR Dapto. Dr Rashid said that SCXR Dapto was on his way home and that he would visit.

141    Ms Hyratt gave the following account of the conversation:

So I said words to the effect – to Dr Rashid – that I had attended the medical centre at Barrack Heights about a week prior and I had met his practice manager, Kylie Bradley. Kylie had said to me that Dr Rashid was looking to open up a radiology centre at Barrack Heights and that the reason that I had come to see him was to discuss if that was an option that we could look at together. Dr Rashid said words to the effect that he hadn’t yet decided whether he wanted to put a radiology centre there, himself, or if it was something that he wanted to do with somebody else. I said words to the effect that if that was the case that Dr Brecher would be happy to offer reporting services to him. And Dr Rashid said words to the effect if I could please forward Eric’s CV to his email and he gave me his business card.

142    By 18 May 2015, Dr Rashid had not visited SCXR Dapto. Ms Hyratt sent Dr Rashid an email on 18 May 2015 which included:

I hope you’re well. I just wanted to touch base with you and see how things are going.

We are keen to work together with you in the future. Whether that be arranging some kind of partnership to open up at Barrack Heights or just providing reporting for you.

I have attached Dr Brecher’s CV for you to take a look at. He would be interested in doing any teleradiology work you might have available.

143    Having presumably not received a response to her email, Ms Hyratt telephoned Dr Rashid at 9:46 on the morning of 20 May 2015. She reported to Dr Brecher that Dr Rashid wanted to talk with them later that week or early the next week.

144    On 29 May 2020, Ms Hyratt sent a message to Dr Brecher stating that a meeting had been arranged with Dr Rashid on Tuesday morning, namely 2 June 2015.

D.4    2 June 2015: Dr Rashid’s first meeting with Dr Brecher

145    Dr Rashid visited SCXR Dapto on 2 June 2015. Dr Rashid recalled meeting with Dr Brecher and Ms Hyratt. His evidence was that Dr Brecher stated that he did not like corporate radiologists and that they did not provide a good service. Dr Brecher said he was from the US and that he had worked for NightHawk Radiology. Dr Brecher stated that he and Ms Hyratt wanted to promote SCXR Dapto at Barrack Heights. Dr Brecher said he was able to read up to 400 reports in a day and that his productivity was equivalent to three or four radiologists.

146    Ms Hyratt’s evidence was:

So Eric said words to the effect that I had told him that Dr Rashid was looking to put a radiology centre in at Barrack Heights and that Eric would be open to doing that as South Coast X-Ray or that if it was something that they wanted to do together he was open to that. Dr Rashid again said words to the effect to Eric that he was still undecided about how he wanted to do that. Eric said words to the effect that he would be happy to just offer reporting services to him. Eric told – said words to the effect to Dr Rashid that he had bought the practice here at Dapto from Arthur Stanton about a year earlier and that he had worked hard to improve the services here, that he had a particular ability to read large volumes of reports and that he could make good profit from – from doing that, and so whatever Dr Rashid decided in the future that he would be happy to work with him. At that meeting I said words to the effect that one of the first things that we would need to do was to check if it was a DWS area, a District of Workplace Shortage. I said this because Eric is a foreign trained doctor and he can only work in those areas. I don’t recall at the moment whether Dr Rashid said that it was or wasn’t a District of Workplace Shortage, but we made inquiries afterwards to find that it was.

D.5    Early June 2015: Dr Rashid and Healthcare Imaging

147    On 2 June 2015, Mr Ayers of Healthcare Imaging sent Dr Rashid a follow up email to his email of 31 March 2015 offering to lease the Radiology Area.

148    On 4 June 2015, Dr Rashid wrote an email to Mr Ayers attaching a floor plan of what had been PRP’s radiology practice, the terms of the previous lease and other floor plans. He stated:

If you are happy with the same terms and conditions as our previous tenant P.R.P, I will ask my solicitor to draw 5 years * 5 years lease starting from 15th July 2015.

149    The attached “reference schedule” indicated that PRP’s lease stipulated rent of $276,042.88 per year, payable in advance by equal calendar monthly instalments of $23,003.57.

150    Mr Ayers responded by email on 9 June 2015 stating:

Thank you for your email, I am pleased we are able to continue our discussion for the new Radiology facility at Barrack Heights. We welcome this exciting opportunity, however with regards the lease we would be only willing to commence payment terms upon completion of our fit out of a prepared site.

I think the next stage is for us to meet again with our property representative/s and formalise a heads of agreement?

D.6    Mid-June 2015: Meeting between Dr Brecher and Dr Rashid

151    Dr Rashid gave evidence, which I accept, that Ms Hyratt asked him to visit Dr Brecher again at SCXR Dapto. Dr Rashid visited in the middle of June 2015. Dr Rashid stated that, when walking him to Dr Brecher’s room, Ms Hyratt stated Dr Brecher was a very good radiologist and “we want to promote our South Coast X-Ray in Barrack Heights”. He said they went downstairs to the room where Dr Brecher did his reports. Dr Rashid said Dr Brecher again stated that he did not think corporate radiologists were very good. Dr Brecher then said that Primary, which was very near to Dr Brecher’s office, no longer gave him work because they now have their own radiologist. Dr Brecher stated that he would like to promote his services to Barrack Heights and that he would be prepared to pay a fee. Dr Rashid stated that he would talk to his accountant and get back to Dr Brecher. I accept this occurred.

D.7    July 2015: Meeting between Dr Brecher and Dr Rashid and DWS

152    Dr Rashid spoke to his accountant after the meeting with Dr Brecher in mid-June 2015. He had a third meeting with Dr Brecher in July 2015. Dr Rashid said to Dr Brecher that he had spoken to his accountant, who had said that a promotion and management agreement could be put in place, in the same way as Delbest (Dr Rashid’s service company) had done. Dr Rashid stated:

Dr Brecher said: “Well, that’s very good, so when we can have agreement”. And then at that time I told Dr Brecher: “Look, my solicitor is Acorn Lawyer. Ash Agarwal is my solicitor so would you like me to arrange [the] agreement or you will do – you want to ask your solicitor to do it” and Dr Brecher said: “No, go ahead and do, you know, with Acorn Lawyers”.

153    I accept the substance of Dr Rashid’s evidence.

154    After this meeting, Ms Hyratt asked Dr Rashid whether Barrack Heights was within a District of Workforce Shortage (DWS) for radiologists. Dr Rashid stated that it was previously not in a DWS, but that he would check.

155    Dr Rashid checked whether Barrack Heights was within a DWS on 26 July 2015 and found that it was for diagnostic radiologists. He then informed Ms Hyratt that it was. Dr Rashid stated that Ms Hyratt then said that Dr Brecher would like to have a provider number. Dr Rashid said: “Look, I’m talking to Primary at the moment and most probably I’m going to give the … premises to them”. Ms Hyratt responded: “Dr Brecher does not like corporate radiology and he want[s] a provider number”. Dr Rashid said he stated: “Look, you better see Kylie. She is the one who arranges all the DWS thing”.

156    Contrary to Dr Rashid’s evidence, the probabilities favour that, by the end of July 2015, Dr Rashid was planning to open a radiology practice at Barrack Heights, to be operated by Delbest, and that he had in mind that Dr Brecher would provide services for a fee of around 20% of the total charged. I reach that conclusion on the basis of the following events:

(1)    Dr Brecher signed an “Application for an additional location Medicare provider number for a medical practitioner”. This was dated 27 July 2015 but was not sent until 30 July 2015, when it was faxed by Kylie Bradley of “Centre Health Radiology Practice”. Ms Bradley worked for CHC Barrack Heights. The application form identified the practice as “Centre Health Radiology Practice” at Barrack Heights.

(2)    The business name “Centre Health Radiology Practice” was registered by Delbest on 29 July 2015.

(3)    The bank account into which Medicare payments were to be made, in relation to Dr Brecher’s additional location Medicare provider number, was an account which Delbest opened by 30 July 2015.

(4)    As discussed at [164] below, Mr Agarwal had received instructions by 7 August 2015 to prepare an agreement, additional to the Promotional Agreement, under which “Dr Brecher will also provide services to Delbest at a fee that is equal to 20% of the Reports fee + interventional service”.

(5)    As discussed at [165] below, Ms Hyratt’s Facebook messages to Dr Brecher sent on 11 August 2015.

D.8    July and August 2015: Dr Brecher’s and Ms Hyratt’s account of events

157    Dr Brecher gave evidence about a number of meetings with Dr Rashid commencing in early June 2015. His evidence concerning a sixth meeting at his office at SCXR Dapto, probably in July 2015, included:

And can you tell his Honour, please, the substance of what was said on that particular occasion?--- … I then said to Dr Rashid the following: that I think that we – he and I should just go into business together, “We should just open up a radiology site together.” And he said, looking down at notes because he – every time I saw Dr Rashid he was always – he would always carry a clipboard and he would have notes inside the clipboard. And he pulled the note out and it was – well, it was yellow, and it had lines on it and written points, and he said, “What I think we should do is open up a radiology site together, fifty-fifty – that we should obtain a loan for the site, fifty-fifty.” And, at that point, I interrupted Dr Rashid and said words to the effect that, “I don’t know if you remember, Dr Rashid, but I can’t obtain another loan from Medfin until March 2016.” And he said to me words to the effect that, “You don’t have to worry about that because we could get a loan from a – from another bank.” And he said, “What bank do you use, currently?” and I responded words to the effect “ANZ”, and he responded words to the effect, “Then, we will use ANZ to get the loan.” He said – he then said words to the effect that we will – he would manage the business – the – the radiology business – the radiology practice over at the Barrack Heights Medical Centre, and that I would be the radiologist, and that he – I would be paid 15 per cent of the total revenue that the practice earned. He also said that we should – I’m sorry – I’m just ..... something that’s – sorry about this – said that we – we should – we will split – split the – I’m sorry – that he will pay me 15 per cent of the total revenue, and that we would split the profits right down the line, fifty-fifty, so that 50 per cent of the profits would go to Dr Rashid and 50 per cent of the profits would go to me. He then mentioned that we should – that he would find what he described as an independent mutual lawyer to represent us at – for the business, and then asked me words to the effect, “What lawyers have you used when” – “What law firm have you used when buying the Dapto practice from Dr Stanton?” And I responded words to the effect that, “I used Kells Lawyers and I also have used Access Law Group for an unrelated legal matter.” And he said, “Fine. I will go and find a lawyer right away to draw up a contract for us.” I’m just trying to think if there was anything else in this meeting of real consequence. Yes. I also said to Dr Rashid that I should – that I could use the – when he gets the loan, the South Coast X-Ray practice as a collateral and that I would divide my time equally between the Dapto site, my South Coast X-Ray site and this new site that we would own fifty-fifty at Barrack Heights, the radiology practice there.

158    Dr Brecher gave evidence of a seventh meeting which occurred in late July or very early August 2015. Dr Brecher’s evidence of this meeting included:

In late July/very early August 2015, Dr Rashid came over to my office at – in – at the South Coast X-Ray practice in Dapto and sat down with me and said to me words to the effect that, “We’re essentially going into business together. We’re opening up the site. We’re just now waiting for the lawyer to write up a contract for us and that I usually never allow any radiologist or radiology practice managers and so forth, to market directly to my GPs over at the Barrack Heights medical centre, but I will allow you to do that. And I think it’s a good idea because of the fact that you will get to know my GPs and they will get to know you and your reporting, and we could see how the relationship develops” – “the rapport that you develop between yourself and the” – “my referring GPs.” And he said that any work that they may send to the Dapto practice during the period of time between, for example, today and the opening of the Barrack Heights medical centre radiology practice, he would like to get 15 per cent of the total revenue of the work that they referred to the Dapto practice. And I said words to the effect, “That seems logical, Dr Rashid. Could you please, you know, write up a proposal and please give it to Renee Hyratt when you get an opportunity, please, for me to review?” And he said “fine”, that he would go out and do that.

159    I do not accept that the two conversations occurred between Dr Brecher and Dr Rashid in the way suggested by Dr Brecher. Specifically, I do not accept that there was any in principle agreement reached that Dr Brecher and Dr Rashid would become equal owners of a radiology practice at Barrack Heights. The contemporaneous documents suggest it was contemplated that Dr Brecher would be able to promote his services for a fee and that Dr Rashid was contemplating that Delbest would operate a radiology practice at Barrack Heights and that Dr Brecher might provide services to it for a 20% fee.

160    I do accept that Dr Brecher and Dr Rashid had discussed in a general way what business relationship they might have and that their discussions were continually evolving. I do not accept there was an in principle agreement that Dr Brecher and Dr Rashid would jointly own the new radiology practice at Barrack Heights.

161    Ms Hyratt’s evidence about meetings between Dr Rashid and Dr Brecher before the meeting at Relish Restaurant on 30 August 2015 was:

To the extent you can recall what was said between the two men tell – at these impromptu meetings, tell his Honour your best recollection of what was said between the two men using the substance of the words the two men uttered to each other?---Eric said words to the effect that he had a concern about the number of doctors that would refer to a radiology centre that was within a medical centre from outside. Dr – sorry. Eric said words to the effect that it was common knowledge within radiology that if you put a medical centre – sorry – a radiology centre into a medical centre that those doctors outside are concerned about losing their patients to the doctors at the medical centre, and so you needed to be certain that the amount of work that you were getting from within that medical centre sustained the radiology practice. Dr Rashid said words to the effect that he knew the number of patients that were sent from the doctors within the medical centre and that that wasn’t something that Eric had to worry about. Dr Rashid said that he owned a number of medical centres throughout the Illawarra, that he owned some land in Wollongong that he wanted to develop into a medical centre. Eric said words to the effect that he knew that there was opportunity in Kiama for radiology. They – sorry. Eric said words to the effect that whatever Dr Rashid wanted to – to do at Barrack Heights that he was open to working with him on either reporting or opening something together. Some of these things were repeated at numerous meetings.

162    Ms Hyratt did not suggest that there was any in principle agreement reached before 30 August 2015 that Dr Brecher and Dr Rashid would become equal owners of a new radiology practice at Barrack Heights. I conclude that there was no such in principle agreement.

D.9    August 2015: The Promotional & Co-Management Services Agreement

163    Dr Rashid gave evidence that Ms Hyratt contacted him in the first week of August 2015 asking about the promotional agreement, which had been discussed by Dr Brecher and Dr Rashid at the third meeting in July 2015 – see: [152] above. She said that Dr Brecher wanted it urgently. Dr Rashid said he would talk to Acorn Lawyers about it and let her know. Dr Rashid then met with Mr Agarwal, explained the situation, and asked him to draft an agreement. I accept these events occurred.

164    On Friday, 7 August 2015, Mr Agarwal emailed to Dr Rashid a draft “Promotional & Co-Management Services Agreement” (Promotional Agreement) between Delbest and Dr Brecher. Mr Agarwal noted that instructions had been given less than 24 hours earlier. Mr Agarwal indicated that a second agreement was still being drafted, this agreement relating to Dr Brecher providing services to Delbest at a fee equal to 20% of the reporting fee and interventional service:

As discussed, please see attached draft agreement for Promotional and Patient Co-Management Services to Dr Brecher. As you will notes [sic], the manner in which this agreement is set out, Dr Brecher (or his company which will have to be included, if need be) will pay a fixed monthly fee for the promotional services whereas a separate fee is payable for the Patient Co-Management Services which will have to be calculated on the actual services provided each month.

This agreement has been prepared on priority basis practically leaving aside all other work. Given that its been less than 24hrs since you instructed us, we are still working on the second agreement where Dr Brecher will also provide services to Delbest at a fee that is equal to 20% of the Reports fee + interventional service. We will forward this document to you early next week.

Please let us have your comments in relation to the attached document at your earliest convenience so that it may be finalised. If you prefer to meet with us, Simone Goodwin will be available to meet with you and take instructions.

165    On 8 August 2015, Dr Brecher left to the US. He returned on 15 August 2015. Ms Hyratt sent Dr Brecher Facebook messages on 11 August 2015 indicating that Dr Rashid had taken her through CHC Barrack Heights and stating that he had “drawn up a contract for you to go over”. This was a reference to the draft Promotional Agreement. Ms Hyratt saw the area which might be able to be used for a radiology practice. Her message stated: “He showed me through his building”. In her evidence she said it was a big centre and it was exciting. The following Facebook messages were exchanged:

Renee Traish Tuesday, August 11, 2015 at 10:35pm UTC+10

He showed me through his building

Renee Traish Tuesday, August 11, 2015 at 10:36pm UTC+10

Has decided not to put in an MRI but instead to send them direct to us

Renee Traish Tuesday, August 11, 2015 at 10:36pm UTC+10

He [has] drawn up a contract for you to go over

…

Renee Traish Tuesday, August 11, 2015 at 10:37pm UTC+10

He is planning a lot of expansion and it’s good he wants is [sic] involved

166    These messages do not suggest that Dr Rashid and Dr Brecher had, at this point in time, agreed to any 50 / 50 venture at Barrack Heights. Rather, they suggest that Dr Rashid was planning to open a radiology practice, which would not include an MRI. Patients who needed an MRI (a substantial revenue source) might be referred to SCXR Dapto. The contract referred to by Ms Hyratt was the Promotional Agreement. The messages are consistent with Ms Hyratt and Dr Brecher being aware that Dr Rashid was the owner of the Barrack Heights building.

167    In cross-examination, Dr Brecher denied that he had wanted the Promotional Agreement. I do not accept that evidence. It was Dr Brecher who had sought a promotional agreement and Ms Hyratt had pursued Dr Rashid for it, conveying instructions which had been given to her by Dr Brecher that Dr Brecher wanted the agreement urgently. The executed Promotional Agreement was dated 17 August 2015. It was signed by Dr Brecher and witnessed by Ms Hyratt. It was in the same form as the draft which had been sent to Dr Rashid by Mr Agarwal on 7 August 2015. Dr Brecher agreed that he signed the Promotional Agreement, but stated he did not recall signing it. He said he discussed it with his accountant, Ms Nicola Adams. Ms Adams owned Adams Associated Pty Ltd, an accounting practice. Ms Adams denied ever seeing the agreement, but acknowledged that she made an entry on her timesheet recording that she discussed the Promotional Agreement with Dr Brecher and Ms Hyratt on 20 August 2015. I accept Dr Brecher’s evidence that he discussed the Promotional Agreement with Ms Adams.

168    Before further addressing the Promotional Agreement, something should be said about Dr Brecher’s evidence that he showed and discussed the agreement with Ms Adams. Dr Brecher was asked whether he read or discussed the SCMI transaction documents with Ms Adams. Those documents had been emailed to Ms Adams at the meeting on 15 October 2015 at the request of Ms Hyratt and at least implicit request of Dr Brecher. Dr Brecher gave the following evidence:

Did you give them [the SCMI transaction documents] to Nicola, Ms Adams?---No, she’s not a lawyer. I would never give legal documents to an accountant. I’m from the United States. We have – in the United States we have lawyers on speed dial. If I wanted a lawyer – legal documents read, I would send them – I would send it to a lawyer and not someone who’s – to an accountant.

169    This evidence sits uneasily with Dr Brecher discussing the Promotional Agreement with Ms Adams.

170    When asked whether he read the SCMI transaction documents executed on 15 October 2015, Dr Brecher’s evidence included:

I am not a lawyer, and I cannot read legal documents.

171    This evidence was demonstrably untrue because Dr Brecher was taken to legal documents during cross-examination which he had no difficulty reading or understanding, including the Promotional Agreement. It was also inconsistent with other aspects of his evidence.

172    By way of example, on 3 August 2016, Dr Brecher executed a guarantee certificate in relation to a loan to SCMI from ANZ which was witnessed by Ms Hyratt. This document included:

173    Dr Brecher stated that he read the Code of Banking Practice disclosures attached to the guarantee certificate. This included:

1.     Information you should know before you sign a Guarantee

Before you agree to enter into or sign a Guarantee, it is important that you know the following:

•    Before you sign the Guarantee, you should seek independent legal and financial advice on the effect of the Guarantee;

•    You can refuse to enter into the Guarantee;

•    There are financial risks involved in acting as a Guarantor;

•    You have the right to limit your liability in accordance with the Code of Banking

•    Practice and as allowed by law; and

•    You can request information about the transaction of facility to be guaranteed (including any facility with us to be refinanced by that facility).

174    He did not display any inability to read or understand these documents or the loan documentation to which they related, to which Dr Brecher was also taken in cross-examination.

175    Dr Brecher was taken in cross-examination to the Promotional Agreement. The recitals were:

Since:

A.     The Company is a company duly incorporated in New South Wales.

B.     The Company owns and operates integrated multidisciplinary primary health care facilities also known as medical centres, in the state of New South Wales, Australia.

C.     Eric is a radiologist and provides radiology services to patients.

D.     Eric has requested and the Company has agreed to provide the Promotional Services and the Patient co-Management Services to Eric on the terms and conditions set out in this Agreement.

176    Recital D, to which Dr Brecher was taken in cross-examination, is consistent with the conclusion I reach in any event that it was Dr Brecher who wanted to provide services at Barrack Heights and that it was he who had approached Dr Rashid with a view to promoting his services at CHC Barrack Heights.

177    Dr Brecher stated in cross-examination:

Did Dr Rashid come and force you to sign this agreement on 17 or 20 August - - -?---I wasn’t physically - - -

2015?---I wasn’t physically forced, but Dr Rashid, 100 per cent, was the purpose [sic – person] who came and wanted this contract signed. He’s the one who came to me and said that, because we’re going to be into business together and we’re essentially waiting for the contract to be signed, that he would like 50 per cent of the total revenue that his doctors ..... I never wanted that. I never wanted this agreement. I didn’t ask for my lawyer to write it up. His lawyer wrote it up, okay. And for you to say that, you know, that’s a very – I mean, I didn’t see that statement in the contract. It doesn’t mean I didn’t read the contract or review it, but I didn’t see that statement. And if I saw it, I wouldn’t have signed it. So what I’m saying is that I made a – there’s a mistake in that I didn’t see that statement. But I never wanted this document.

178    I do not accept that there was an agreement for Dr Rashid and Dr Brecher jointly to operate a radiology practice at Barrack Heights at this point in time. What had happened to this point was that Ms Hyratt had identified an opportunity at Barrack Heights and Dr Brecher had pursued the opportunity. Dr Brecher wanted to promote his services to Barrack Heights and had told Dr Rashid that he would be prepared to pay a fee. Dr Rashid had agreed and had asked whether Dr Brecher’s solicitor would draft an agreement or whether his solicitor should. Dr Brecher said that Dr Rashid’s solicitor could draft the agreement. Dr Brecher then instructed Ms Hyratt to pursue the Promotional Agreement in early August 2015. Ms Hyratt did pursue it, which prompted Dr Rashid to instruct his lawyers to prepare it urgently and it was received by Ms Hyratt shortly before Dr Brecher returned from the US. I accept that Dr Brecher may also have understood, at this time, that Dr Rashid was considering opening a radiology practice to which Dr Brecher might provide services for a 20% fee.

179    Dr Brecher’s evidence continued (emphasis added):

That’s convenient for you, isn’t it, Doctor?---No, it’s just the truth. I mean, I don’t have any – there’s no evidence that I ever wanted this [the Promotional Agreement], so why would you say that it would be convenient for me. I mean, do you have any evidence that this is something that I wanted? I mean, this is something I wouldn’t want. I mean, why would I want to give, for example, 50 per cent of the total revenue to Dr Rashid when I didn’t have to. I mean, I never once went to any medical practice when any doctor has ever asked for money that their doctors – that their doctors would send. The only time that I’ve ever experienced this, in all my years of radiology, is with Dr Rashid. Every other medical practice you go to where you go and market to those places, no one ever asked for money to be repaid to them for patients that they send. To me, it sounded like he was asking for a bribe, a kickback. And I did discuss this with my accountant, Nicola Adams, because I was concerned about this fact. If I had – if I was the one, like you say, who went and wanted this, then why did I go and show it to Nicola? You could ask her when she’s on the stand. I did have her look at it. I expressed the same concerns to Renee about it. And there’s no evidence that I was the one – any – had any involvement in the drawing up of this contract.

180    Dr Brecher asserted that, by this time, he already had an agreement with Dr Rashid for a joint venture. He said (emphasis added):

Because this agreement doesn’t set out any of the terms for the joint venture, does it?---This – this agreement was just for Dr Rashid to get what I believe now are kickbacks, that’s all. And this has nothing to do with the agreement we had. What I was told by Dr Rashid was this. That because we’re going into business fifty-fifty and we’re going – you know, we’re just waiting for the contract to be signed, that he would – he wanted 50 per cent of the total revenue that his doctors sent to the practice. And I agreed to it because of the fact that – well, I was reluctant to – to agree to, like I said. I went to, you know – he wrote up something where – it was a cross-promotional agreement that I had never heard of before and he went and – you know, she ..... thought that it wasn’t – it was a legal document and – and that’s how that happened. I mean, by the time – otherwise, what you’re saying is that Dr Rashid, you know, asked me and had a lawyer write up a kickback scheme without any, you know, fact that him and I were going to go into business together. It’s just not true. I wouldn’t have done it. I wouldn’t have signed this and I would have, like I said, gone to the police if he – this happened to me.

181    As noted earlier, Dr Brecher had in fact been aware of and involved in arrangements which involved what he described as “kickbacks”. His position that his evidence was not misleading because of an asserted distinction between radiology practices and medical practices is disingenuous – see: [70] to [79] above, particularly at [77].

182    Dr Rashid’s evidence was that he received the Promotional Agreement, signed by Dr Brecher and witnessed by Ms Hyratt, on his desk at Barrack Heights. He said he telephoned Ms Hyratt and said:

You can come and you have access to all the rooms of doctors. You can use – and all the computers and put on your program, and if you need any help, you can help with Dr Sangi and Kylie will help you or another staff will help you.

183    I accept this evidence. Dr Rashid thought that this occurred on 17 August 2015. Dr Brecher considered it may have been on 20 August 2015.

184    Dr Brecher asserted that the contract to which Ms Hyratt was referring in her Facebook message at [165] above was a joint venture agreement. There was no such agreement at this time. Dr Brecher’s case was that, in mid-August 2015, he was waiting for a draft agreement setting out the terms on which he and Dr Rashid would jointly own a radiology practice at Barrack Heights. I do not accept that Dr Brecher had any such expectation. There was no such agreement, in principle or otherwise, at this point in time.

185    On 20 August 2015, Dr Brecher and Ms Hyratt went on a tour of Barrack Heights, which included seeing the area that Dr Rashid considered would be used for radiology. This was the Radiology Area in respect of which Primary had shown interest. Dr Brecher had not previously been into the Radiology Area, although he had previously seen a diagram or plan of the area. After the tour, Dr Brecher said to Dr Rashid that he considered the premises to be “very impressive”. During the tour they agreed to meet the next day.

186    Dr Rashid gave the following account of his next conversation with Dr Brecher, the day after the tour of Barrack Heights:

And what did Dr Brecher say and what did you say?---Dr Brecher say, “I’m very impressed”, you know, “by your centre and I like the big area of your radiology area, but this corporate radiologies, they are not good – they are not – do not provide you very good service. I’m against this corporate radiology. I want to open number of the radiology centre against this corporate radiology.” Then Dr Brecher said, “I can report 400 reports a day. I can look after five to six radiologies myself”, and then Dr Brecher showed me – he took out ..... album, you know. He said, “Here is my album. This – I – this my hobby. I collect expensive artwork.” So in this album was the photographs of different – I don’t know much about the art, but underneath was written the prices of each painting: every one hundreds of thousand dollars that one. And Dr Brecher said, “I have a lot of real estate in USA, but my problem is that I can’t get a loan in Australia. The bank do not recognise the assets in USA.” And then he said, “Dr Rashid, if you and I go business together, we will make – we will merge Dapto practice and will we – we will form a new company; we will have a 50/50 partnership. You – I will look after mostly the – on the reporting and you will look after new practices, finance, promotion and all this, and we will do very well and we will have a number of the practices.” And as far as – “You will get almost a million dollar.”

187    Dr Rashid stated that this was the first time that Dr Brecher had expressed a desire to enter into a jointly owned business venture with Dr Rashid. I accept this conversation occurred.

188    Ms Adams gave evidence that she had a discussion with Dr Brecher which “would have been” on 21 or 22 August 2015 in which Dr Brecher was “excited at the prospect of going into a partnership” with Dr Rashid. Ms Adams stated that she said to Dr Brecher that she did not like partnerships and that she would try and come back with some additional structures that Dr Brecher could go into.

189    On 27 August 2015, Ms Hyratt sent an email to Dr Rashid indicating that the InteleConnect program was operational. This program would provide access to digital images and reports prepared by SCXR Dapto to the doctors at Barrack Heights within hours. This would, presumably, increase the chances of doctors at Barrack Heights referring their patients to SCXR Dapto in connection with the Promotional Agreement.

190    Dr Rashid stated that he had a meeting with Dr Brecher and Ms Hyratt around 28 August 2015 at which he gave Dr Brecher a floor plan of the Barrack Heights radiology premises, which he had asked for earlier. Dr Brecher asked if he could see Dr Rashid’s other practices and Dr Rashid drove them to Wollongong and Unanderra. During the trip Dr Brecher complained about not getting many referrals from Barrack Heights and asked whether referrals were going to other practices. Dr Rashid said it would not be easy to work out, because the information was written manually.

191    After this meeting, Dr Rashid directed Dr Sangi, an administrative assistant at Barrack Heights, to prepare a list of all the GPs at Barrack Heights, the number of imaging referrals which had been made and the medical imaging provider to whom the referral had been made. Dr Rashid’s evidence, which I accept, included:

[152]     At CHC Barrack Heights, there is no central database that records the referrals each of the GPs write.

[153]     … This list took a lot of work on the part of my staff to prepare given such a list was not readily available and had to be compiled from a variety of sources and individual inquiries of various people.

D.10    30 August 2015: Relish Restaurant meeting

192    On 30 August 2015, Dr Rashid attended a brunch meeting with Dr Brecher and Ms Hyratt at Relish Restaurant. Ms Hyratt had invited Dr Rashid to attend this meeting with herself and Dr Brecher. The meeting lasted about two hours. Dr Rashid’s evidence was that Dr Brecher told Dr Rashid that he had bought SCXR Dapto in 2014 and that its income for the 2015 year was around $3 million. He stated that its net profit was about $350,000 and that there was a loan or loans of about $2.2 million from Medfin. Dr Brecher stated that he could complete 400 reports a day and could look after five to six practices. Mr Hyratt generally agreed that these things were said, although she could not recall a discussion about SCXR Dapto’s loans. I accept Dr Rashid’s evidence that these matters were discussed.

193    Dr Rashid gave evidence that he stated that he purchased his medical centre in 1998 and that it had previously been a shopping complex. He had applied to the “Shellharbour Council for Shellharbour Health Care City” and stated that the “[Barrack Heights] centre health complex [was] the first stage of Shellharbour Health Care City”. Barrack Heights officially opened in 2006, but a radiology practice, and nuclear medicine and pathology services were operating at the site almost two years earlier in 2004. Ms Hyratt denied that Dr Rashid referred to this history. I accept that Dr Rashid referred to this history.

194    Dr Rashid gave the following evidence:

Yes. And did Dr Brecher say anything to you?---Dr Brecher said, “Look, Dr Rashid, what we had discussed before, I’m very excited about that, that we combine the both, you know, Barrack Heights – Dapto and Barrack Heights together.” We have got almost 2.2 loan in – in Dapto practice and 2.2 loan in – will get – will get it to for the Barrack Heights, and – and then we can work number off the other practices and other practices can be paid off by profit of the – this – of this one – practices.”

Did Ms Hyratt say anything?---Ms Hyratt said, “Dr Rashid, I have put the software program in most of the GPs. Where do you get the GP?” I said, “It’s very difficult to find GPs. Most of the GPs comes from UK, and it takes about one and a half years to two years time, and when they arrive, some time it happens that they work for a little while, they find their own practice or they go somewhere else, or sometimes happen they will go back to UK. So it’s a long process. We started this medical centre with four GPs only, and – but it is always continuous process.” Then Dr Brecher said that he’s also looking at sourcing another radiologist from USA - - -

195    Dr Rashid said that Dr Brecher stated that he would send the financials of SCXR Dapto for 2015 and asked Dr Rashid to provide him with Primary / Healthcare Imaging’s offer emails as well as PRP’s lease.

196    Ms Hyratt’s account of the meeting in evidence in chief was:

So the meeting at Relish was the first meeting that we had had outside of the workplace. And it was a little bit more of an introductory meeting between us all. Dr Rashid said words to the effect that he and his wife had been in the Illawarra for 40 years. That they were both GPs and that they began their practice in Unanderra. That over that period of time he had expanded the medical centres and he now owned a medical centre at Campbelltown, one at Woonona, the one in Unanderra and one at Barrack Heights. Dr Rashid said words to the effect that both his son and his nephew were radiologists. And Dr Rashid said words to the effect that he had been considering putting radiology practices into those medical centres for a period of time. Eric said words to the effect that he had come to Australia originally to work for an American company, NightHawk, and he lived in Sydney. I believe that that was in early 2000s. And that, after going back to America – that he had liked Australia and wanted to return. Eric said words to the effect that he had decided that he wanted to own his own business and that was why he bought Dapto – so that he could make the profit himself rather than other people. He said words to the effect that when he worked for NightHawk that he was their most productive radiologist. That he could report up to 400 cases a day. And that that was the equivalent of three or four radiologists. Eric said words to the effect that since opening Dapto he had done a lot of work to upgrade that centre. That he had done work aesthetically to the centre and upgraded the software systems to make the work more efficient. And that he had improved the profitability substantially. That – at that time Dapto had revenue of around $3 million. I said words to the effect that I was very new to all of this business. I had spent all of my life working in disability services, both with children and adults. And that this was a very new area of career for me. That – I said words to the effect that we had just put in a new PACS system and that a RIS and a PACS were new terms to me. I said words to the effect that we had had a bad experience with GE recently when a tube blew in our CT machine and that if they opened a practice at Barrack Heights that they should be careful of GE. Again, at this meeting, Eric said words to the effect that if they were to open up a radiology centre in Barrack Heights – that you needed to be sure that you had enough work to sustain that practice. Dr Rashid said words to the effect that it wasn’t something that he had to worry about because he knew the amount of work that came from the doctors within the medical centre – the types of studies that they were sending. Dr Rashid said words to the effect that there had been other radiology centres practising from that same location for a number of years and that they had been happy there. That PRP had only left that location because they had had an ongoing dispute with the nuclear medicine site next door because they had the same machine. And so there was an ongoing dispute between them. And PRP decided to just purchase their own place and move from the location. Dr Rashid said words to the effect that there was other services that had been operating within that centre for a long time, such as Laverty Pathology and the nuclear medicine. Dr Rashid also said words to the effect that he had a relationship with a number of GPs in the area who didn’t work at the medical centre because he had been involved in bringing them to Australia and that he felt confident that he could have conversations with them either in social or professional meetings and to encourage them to just use the South Coast X-Ray service at Barrack Heights. Excuse me a moment. Eric said words to the effect that if Dr Rashid wanted to see any of the financial records – he wanted to show Dr Rashid proof that he had done well at Barrack Heights and he instructed me to show him anything that he wanted to see. That’s all that I can think of at the moment from that meeting.

197    As noted at [186] above, on 21 August 2015, Dr Brecher had proposed to Dr Rashid that the two of them go into business together, by merging SCXR Dapto with a new company and opening new radiology practices. I conclude that, at the meeting at Relish Restaurant, Dr Rashid and Dr Brecher agreed that they would look into conducting two radiology practices together, SCXR Dapto and a new practice at Barrack Heights, through a new corporate vehicle and with a view to opening or acquiring further radiology practices later. On balance, I conclude that Dr Brecher suggested getting a $2.2 million loan to fit-out and equip the new Barrack Heights practice on the basis that this replicated the debt that Dr Brecher stated was owed by SCXR Dapto. On balance, I conclude that Dr Brecher suggested that the debt of the merged entities could be repaid from the profits of the merged practices.

198    Dr Rashid’s evidence is consistent with the surrounding circumstances, including Ms Hyratt providing financial information in the days after this meeting. The subsequent events are consistent with Dr Rashid being provided with financial and other information with a view to him making an informed decision about whether or not it was appropriate to become, through some mechanism, a joint owner of SCXR Dapto.

199    As noted earlier, Dr Brecher’s evidence was to the effect that the meeting at Relish Restaurant was in the nature of a social meeting and that a preliminary agreement had been reached by late July/very early August 2015 for him and Dr Rashid to become joint owners of a new radiology practice at Barrack Heights. I do not accept that was the case. Ms Hyratt’s evidence was that the Relish Restaurant meeting was the longest that they had and “was a fairly significant meeting in the progress of our relationship with Dr Rashid”. Her evidence included:

Prior to that meeting, there had been discussions of various ways in which a business relationship might look between them. And from the meeting at Relish, it began to progress.

200    Dr Brecher’s evidence was that the first time he heard of the possibility of merging SCXR Dapto with a new practice at Barrack Heights was in September 2015, after he had been given a “mud map” which contained a structure diagram contemplating such a merging – see: [214] below. The mud map had been provided by Dr Rashid to Ms Hyratt, who then showed it to Dr Brecher. I do not accept that there had been no earlier discussion about the possibility of merging SCXR Dapto with a new practice at Barrack Heights. It is unlikely that Dr Rashid would have sent a mud map containing such a proposal without having ever discussed the possibility with Dr Brecher. Dr Brecher did not give evidence that he had any discussion with Dr Rashid after receiving the mud map, and before executing the SCMI transaction documents on 15 October 2015, as to whether he was willing to give up half of his interest in SCXR Dapto. Dr Brecher’s account is not supported by any other witness and is implausible.

201    The probabilities favour, and I conclude, that the mud map broadly reflected what Dr Rashid and Dr Brecher had earlier discussed and agreed and that it was prepared as a direct consequence of the discussion which had occurred at Relish Restaurant on 30 August 2015. As noted earlier, it was Dr Brecher who proposed merging SCXR Dapto into a new corporate vehicle.

D.11    31 August 2015: Meeting with Dr Rashid and provision of financial information

202    Ms Hyratt sent an email to Dr Rashid at 10:36 am on 31 August 2015 attaching statements in relation to the Goodwill Loan and Lease Agreement with Medfin in respect of the 2014–2015 financial year. These indicated that the following amounts remained outstanding as at 30 June 2015:

(1)    in relation to the Lease Agreement an amount of $1,476,720.15;

(2)    in relation to the Goodwill Loan an amount of $787,544.03.

203    Dr Rashid reviewed the material provided by Ms Hyratt, and concluded that the balance of the Medfin Facilities was $2,264,264.18.

204    Ms Hyratt sent an email to Dr Rashid at 10:38 am on 31 August 2015 attaching a “Maintenance Service Agreement” between GE Healthcare Australia Pty Limited and EBPL as trustee for SCXR Unit Trust relating to the CT and MRI machines located at SCXR Dapto. These provided for an annual service charge of $210,000, plus GST, for two years (17 August 2015 until 16 August 2017) payable in monthly instalments of $19,250 including GST.

205    Later that morning, Ms Hyratt met with Dr Rashid. Dr Rashid stated that she gave him a profit and loss statement of the SCXR Unit Trust for the financial year ended 30 June 2015. Dr Rashid read the profit and loss statement and saw that the total income was $2,872,251.12 and net profit was $334,747.15. Dr Rashid stated that he relied on this material in deciding to enter into the SCMI transaction on 15 October 2015. Dr Rashid’s accountant, Mr Ali Khan, was visiting Dr Rashid when the profit and loss statement was received. Dr Rashid asked Mr Khan to comment on any matters of concern in the profit and loss statement. Mr Khan identified two issues on the profit and loss statement about which he stated Dr Rashid should ask Ms Hyratt for an explanation. The issues related to a late fee and a break-down of wages and payroll tax.

206    As noted at [189] above, Ms Hyratt had set up all of the doctors at Barrack Heights with InteleConnect accounts. Ms Hyratt sent a Facebook message to Dr Brecher at 12.18 pm on 31 August 2015 confirming that the doctors at Barrack Heights would be referring work to SCXR Dapto from the following day. She stated: “They will give out all our referrals to the doctors and change their referral default to us”.

207    Ms Hyratt sent an email to Dr Rashid at 3:36 pm on 31 August 2015 which attached the profit and loss statement for the financial year ended 30 June 2015. In her email, Ms Hyratt said that this copy contained handwritten notes from her accountant. The late fee was identified as a “code error” and the payroll tax was “to be determined and lodged”.

208    At 10.22 pm on 31 August 2015, Ms Hyratt emailed the receptionist at Barrack Heights a list of all of the doctors and allied health professionals at Barrack Heights, together with their usernames for the new InteleConnect accounts. There were 29 names on the list. Eighteen of those were the GPs listed on “Daily Diagnostic Counts” prepared in September 2015. I conclude that Ms Hyratt knew that there were 18 GPs working at Barrack Heights as at 31 August 2015 and I infer that she discussed this with Dr Brecher. I do not accept as true Dr Brecher’s evidence to the effect that he believed that there were 20 full-time GPs conducting their practices at Barrack Heights as at August and October 2015.

D.12    September 2015: Dr Brecher becomes increasingly anxious to secure a deal; Dr Rashid provides a “mud map” structure diagram

209    Dr Brecher and Dr Rashid met on 2 September 2015. Dr Rashid gave Dr Brecher copies of three emails from Mr Ayers of Healthcare Imaging and a letter from a solicitor about a potential lease of an area at Barrack Heights to PRP in 2012. Dr Brecher was anxious that Dr Rashid not lease the area to Healthcare Imaging and considered that Dr Rashid was “pitting” him against Healthcare Imaging, but he did not think that there was anything wrong with “some gamesmanship”.

210    Dr Brecher was also concerned that, without expanding, SCXR Dapto would be seriously tested financially or fail. A number of Facebook messages between Dr Brecher and Mr Hyratt indicate a real sense of urgency on the part of Dr Brecher to enter into the venture with Dr Rashid. For example, the following messages were sent on 14 September 2015:

Eric Brecher Jerins Monday, September 14, 2015 at 11:08am UTC+10

please push it all forward. if we can’t complete this deal we’ll fail here sweetie

Eric Brecher Jerins Monday, September 14, 2015 at 11:08am UTC+10

it’s keeping us alive

Renee Traish Monday, September 14, 2015 at 11:31am UTC+10

Yes hunny I think everyone is keen to push forward

211    The Facebook messages on 14 September 2015 between Dr Brecher and Ms Hyratt also included:

Eric Brecher Jerins Monday, September 14, 2015 at 10:54am UTC+10

pleaes [sic] make sure that you don’t tell chris that rashid is a silent partner

Eric Brecher Jerins Monday, September 14, 2015 at 10:54am UTC+10

we have to tell everyone that we are stand alone and have no affilitation [sic] with any other practice

Eric Brecher Jerins Monday, September 14, 2015 at 10:54am UTC+10

otherwise we’ll be destroyed

Eric Brecher Jerins Monday, September 14, 2015 at 10:54am UTC+10

can you please talk to nicola about that

Eric Brecher Jerins Monday, September 14, 2015 at 10:55am UTC+10

how do we set it up

Eric Brecher Jerins Monday, September 14, 2015 at 10:55am UTC+10

my only concern is that we will lose business if others find out we are in a partnership with dr. rashid

Renee Traish Monday, September 14, 2015 at 10:56am UTC+10

Yes I am not letting anything on but I’m not sure how to go about it all

Renee Traish Monday, September 14, 2015 at 10:56am UTC+10

I will talk to Nicola

Eric Brecher Jerins Monday, September 14, 2015 at 11:00am UTC+10

pleaese [sic] ask her how we should handle things

Eric Brecher Jerins Monday, September 14, 2015 at 11:00am UTC+10

we NEED chris

Eric Brecher Jerins Monday, September 14, 2015 at 11:01am UTC+10

we also have to be able to promote to others that we are completely independently operated

Eric Brecher Jerins Monday, September 14, 2015 at 11:01am UTC+10

so we need to do this all leagally [sic]

Eric Brecher Jerins Monday, September 14, 2015 at 11:01am UTC+l0

Legally

Renee Traish Monday, September 14, 2015 at 11:05am UTC+10

Absolutely I agree with all that

Eric Brecher Jerins Monday, September 14, 2015 at 11:06am UTC+l0

we have to make sure that dr. rashid knows that otherwise we’ll fail. dr. rashid will make a fortune this way

212    On 14 September 2015, Ms Hyratt sent an application to Medicare for an additional provider number for Dr Brecher. This related to “Southcoast XRay” at the “Centrehealth Complex”. Dr Brecher signed the form. The covering letter indicated that SCXR Dapto was expanding and provided an additional business address at Barrack Heights. This is more consistent with Dr Brecher believing that there was to be a merger of SCXR Dapto and a new radiology practice at Barrack Heights than with a belief that the agreement was simply to open a new radiology practice at Barrack Heights to be jointly owned by Dr Rashid and Dr Brecher.

213    On 15 and 16 September 2015, Dr Brecher sent Ms Hyratt Facebook messages which included:

Eric Brecher Jerins Tuesday, September 15, 2015 at 10:53am UTC+10

sweetie can you please start moving ahead with the contract with Dr. Rashid?

Eric Brecher Jerins Tuesday, September 15, 2015 at 10:53am UTC+10

we need to have something signed asap

    …

Eric Brecher Jerins Wednesday, September 16, 2015 at 1:53pm UTC+10

can you get things going with rashid

214    Dr Rashid visited SCXR Dapto between 14 and 20 September 2015 and gave to Ms Hyratt what was referred to at the hearing as a “mud map”. This was a document which Dr Rashid had prepared, in consultation with his accountant, Mr Khan, which summarised in a diagram a possible structure for the merging of Dr Brecher’s and Dr Rashid’s interests. Dr Rashid asked Ms Hyratt whether she was happy with the proposed structure and Ms Hyratt said she would show the mud map to Dr Brecher. The mud map was in the following form:

215    As noted earlier, it is likely that this mud map broadly reflected Dr Brecher’s and Dr Rashid’s earlier discussions. In his evidence, Dr Brecher insisted that this was the first he had heard of him potentially giving up a half interest in SCXR Dapto. I do not accept his evidence. It was Dr Brecher who first raised the idea of him and Dr Rashid conducting two radiology practices together, SCXR Dapto and a new practice at Barrack Heights, through a new corporate vehicle, with a view to opening or acquiring further radiology practices later.

216    In written closing submissions, heavy reliance was placed by Dr Brecher on his Facebook messages to Ms Hyratt, in particular the following message sent on 18 September 2015:

Eric Brecher Jerins Friday, September 18, 2015 at 5:12pm UTC+10

after sale eric makes 1.5 million

217    It was submitted that Dr Brecher understood that he would be receiving a substantial sum of money for a half interest in SCXR Dapto. Dr Brecher did not explain this message or surrounding context. Even if Dr Brecher considered, at this particular point in time, that he might receive an amount for selling a half interest in SCXR Dapto, the Facebook message does not suggest that the idea of disposing of a half interest in SCXR Dapto was new. The surrounding events reveal that it was not new. Dr Brecher had proposed the idea on 21 August 2015 and pursued it on 30 August 2015 and thereafter.

218    On 21 September 2015, Dr Brecher sent the following Facebook messages to Ms Hyratt:

Eric Brecher Jerins Monday, September 21, 2015 at 10:36am UTC+10

can you please make sure that nicola looks over the new documents. and i would like money released to me before the merger takes place if possible

    …

Eric Brecher Jerins Monday, September 21, 2015 at 1:14pm UTC+10

we’re almost at the finish line and you’re burnt out and can’t work

Eric Brecher Jerins Monday, September 21, 2015 at 1:15pm UTC+10

we have to pull very good numbers until we merge with rashid

Eric Brecher Jerins Monday, September 21, 2015 at 1:15pm UTC+10

can’t you please just pull yourself together until that happens?

219    The “new documents” referred to in the first Facebook message on 21 September 2015 extracted above was likely a reference to the “mud map”. Although Dr Brecher suggested that the “new documents” might not have been the mud map in cross-examination by Dr Rashid’s counsel, he later conceded in cross-examination by counsel for Acorn Lawyers that the “new documents” were “probably” a reference to the mud map. Ms Hyratt readily conceded that the documents that they were getting Ms Adams to look over were the mud map and documents relevant to the incorporation of SCMI. Ms Hyratt acknowledged that Dr Brecher was talking about a merger. Her understanding was that Dr Brecher wanted the money he had invested in SCXR Dapto, which she considered to be about $400,000, released to him before the merger took place.

220    Dr Rashid said that he spoke to Ms Hyratt on about 21 September 2015. His evidence included:

So that’s the 14 September, Doctor?---Yes.

Can you recall when you spoke with Ms Hyratt again?---I think around 21 – yes. Around 21 September she – Ms Hyratt rang me that - - -

Okay. And thank you again. And what did Ms Hyratt - - -?---Yes. She told me that- - -

- - - say to you and what did you say to Ms Hyratt?---Ms Hyratt told me that Dr – Dr Brecher had a look on that, and we had – we are happy with this – everything, and we asked, “Could you go and ask to form a new company”. So she asked my accountant to form a new company. I said, “All right. I will do that”. So I rang Mr Khan to form a new company and he formed a new company on 22nd – and she said, “I want to do it really urgently,” so he formed a company on the 22nd and he sent me those notes – and which I forwarded to Ms Hyratt.

221    Dr Rashid said that he spoke to Ms Hyratt on about 22 September 2015. His evidence included:

Do you have a conversation, as best you can recall, with Ms Hyratt on 22 September 2015?---Yes, she rang me again and said, “Look, everything” – that everything is all right, but their accountant has suggested one thing and that they want a trust formation. And then I received an email from Ms Hyratt on the 22nd – if I recall correctly, it was 22 September. And to this email was attached my diagram, which I have given to her. And on that diagram, in the middle, there was this query made in handwriting.

I will stop you there. So that’s 22 September?---Yes.

222    On 22 September 2015, Ms Hyratt sent an email to Dr Rashid stating:

Hi Dr Rashid,

I have just been chatting with our accountant, he is happy with the set up you have but has a few ideas he’d like to discuss with your accountant.

Could you have them give Darren [Mumford] a call on [telephone number]

Look forward to seeing you tomorrow.

223    Attached to this email was a copy of the mud map with handwritten comments. I conclude that Dr Brecher received advice about the proposed merger from his accountants, just as he had in relation to the Promotional & Co-Management Services Agreement. This included advice from Mr Darren Mumford, an accountant who was, at the time, contracted by Adams Associated. He was later employed by Adams Associated. It was Mr Mumford who suggested that the structure incorporate a unit trust and Mr Mumford handwrote that on the mud map. I infer from the email set out above and the surrounding events that Dr Brecher’s and Dr Rashid’s accountants had further discussions about the structure. It is likely that the accountants discussed that SCXR Dapto should be rolled into the new structure so as to minimise stamp duty.

224    As noted earlier, Dr Brecher’s case was that he had reached an agreement with Dr Rashid, at the end of July or early August 2015, that the two of them would own the radiology practice at Barrack Heights in equal proportions and would be equally responsible for the necessary loans. Dr Brecher stated that, at that time, Dr Rashid did not suggest that he would be taking a 50% interest in SCXR Dapto. Dr Brecher’s case was that this was first suggested in mid-September 2015. His evidence was that he was taken by surprise at the meeting of 15 October 2015 when he was met with agreements which reflected SCXR Dapto being rolled into the new entity. I do not accept Dr Brecher’s evidence as truthful.

225    Dr Brecher’s evidence to questions asked by Dr Rashid’s counsel included:

- - - to put into place a joint venture?---No. No. Because, like I said, I was – you know, initially – this is what happened. Like, for example, if you – your Honour looks like you will see in August 2015, Dr Rashid wants to open up the practice himself. Then, a couple of weeks later, he wants to go into business with me fifty-fifty. And then, in mid-September, he – it seems like he wants to buy half of Dapto or all of Dapto. I don’t – I didn’t know what he wanted to do. Okay, so things kept changing and when I went in to the meeting on 15 October 2015, because he kept changing his mind all the time, I didn’t know what to expect. The only thing that I really knew – the only thing I ever discussed with him and agreed to him – with him about was the fifty-fifty deal at the end of July, early August.

…

But you had made the agreement. You knew what the terms of the agreement were. They had to mean something to you?---We agreed – Dr Rashid and I agreed on an end of July, early August, what I said in my affidavit, that we would own the Barrack Heights practice fifty-fifty and we would take out a loan for it fifty-fifty. That’s the only thing him and I discussed in person. Nothing else was ever discussed. And there’s no proof that anything else was ever discussed. I mean, for example – no. I’m sorry. I’m advocating for – so sorry about that.

226    Dr Brecher’s evidence to questions asked by Acorn Lawyer’s counsel included:

Okay. And it’s the case, isn’t it that Ms Hyratt had responded on your behalf to Dr Rashid regarding the mud map and the structure?---Yes.

Yes. And she had referred to the accountants – your accountants, being Adams Associated – contacting Dr Rashid’s accountants to further the mud map proposal?---Yes.

Yes. And shortly thereafter you received and signed the unit holders’ agreements and other documents incorporating SCMI, didn’t you?---Yes.

Yes. Now, by contrast, you give evidence of what you call a fifty-fifty deal, arising out of a discussion in late July 2015?---Yes, that’s true.

Yes. And from that discussion that you had, you had heard nothing further from Dr Rashid, had you?---No. I don’t think so, no.

You had received no documents in relation to the fifty-fifty deal?---True.

You had sought no advice from your accountants in relation to that deal?---No.

And it’s the case, isn’t it, that you were proceeding on the basis of the mud map that Dr Rashid had provided to you at that time?---No.

And it’s wrong to the extent you’ve given evidence at this hearing that you attributed no weight to the mud map by the time of the 15 October meeting?---That’s completely incorrect. I said that – and I’m very accurate about this and have been consistent about this, in that I went to the meeting, only having spoken to Dr Rashid about the fifty-fifty deal. I knew that there was a possibility that he may want to purchase part of the Dapto Practice, but we had not discussed it in person. We never got an independent valuation of it by a mutual – by an accountant, and I thought because of those facts that it was probable that his interest in purchasing the company had dissolved. And that’s by 15 October. So when I went into the meeting, I believed in the fifty-fifty deal.

And that’s just improbable, isn’t it, Dr Brecher?---No. It’s actually probable, and it’s true. And I - - -

227    I do not accept Dr Brecher’s evidence. I conclude that Dr Brecher well knew what the proposed arrangements were, in particular that he would not own SCXR Dapto once he entered into the SCMI transaction. By way of example, the following Facebook messages were exchanged between Dr Brecher and Ms Hyratt on 23 September 2015 (emphasis added):

Eric Brecher Jerins Wednesday, September 23, 2015 at 9:50pm UTC+10

sweetie i really hope that we can build more than one site with dr. rashid

Eric Brecher Jerins Wednesday, September 23, 2015 at 9:51pm UTC+10

i would need the barrack height site to do better than the one in dapto to be happy

Eric Brecher Jerins Wednesday, September 23, 2015 at 9:51pm UTC+10

and then open up a third site

Renee Traish Wednesday, September 23, 2015 at 9:51pm UTC+10

I think he plans to build about 6 or so

Eric Brecher Jerins Wednesday, September 23, 2015 at 9:53pm UTC+10

we’re not going to own dapto anymore after we sign it sweetie

Eric Brecher Jerins Wednesday, September 23, 2015 at 9:53pm UTC+10

have no choice though i think with all the other sites opening up around us

Renee Traish Wednesday, September 23, 2015 at 9:56pm UTC+10

I think it will work out but we need to find out how the finances will work yet

228    SCMI was incorporated on 22 September 2015. The relevant documents were prepared by Dr Rashid’s accountant. The documents were forwarded by email from Dr Rashid to Ms Hyratt on 22 September 2015. On 23 September 2015, Ms Hyratt forwarded Dr Rashid’s email and the attached documents to Ms Adams and Mr Mumford of Adams Associated and asked them to look over the documents. Dr Brecher denied that he asked Ms Hyratt to do so. It is likely that he did.

229    As mentioned, it was Dr Brecher’s accountants, Adams Associated, who suggested that SCMI be the trustee of a unit trust. Dr Rashid discussed this with Ms Hyratt at the SCXR Dapto practice on 23 September 2015. Consistently with the Facebook messages, Dr Rashid recalled that Ms Hyratt said that Dr Brecher wanted the relevant transactions to be done urgently.

230    Dr Rashid’s recollection was that he also met with Mr Mumford on 23 September 2015. Mr Mumford did not believe he had met with Dr Rashid at this time. It is not important whose recollection is faulty. I formed the view that both witnesses were genuine in reporting their differing recollections.

231    After Ms Hyratt raised the use of a unit trust, Dr Rashid met with Mr Agarwal and gave instructions on 23 September 2015 for him to prepare a Unit Trust Deed. The file note of this meeting prepared by Acorn Lawyers refers to “20% of reporting” and “15% of revenue”. A draft Unit Trust Deed for the SCMI Unit Trust was created on around 25 September 2015. The initial unit holders were Dr Rashid’s company, Romore, and Dr Brecher’s company, EBPL.

232    Dr Rashid and Dr Brecher both signed SCMI’s constitution and consents to act as directors. Dr Brecher signed these documents without legal advice. Whilst Dr Brecher was adamant in his evidence that he always sought legal advice in relation to any legal document, he explained that he considered these documents were “accounting” or “financial” matters, like the Medfin loan documents which included the provision of personal guarantees. He stated:

Yes, and you didn’t seek any legal advice on this, did you?---I didn’t know I had to seek any legal advice on this.

But you did seek accounting advice, didn’t you?---When it came to accounting matters like – like, for example, these documents, the Medfin documents and so forth – those things I thought were financial. If I knew that I needed to seek a lawyer for those things, I would have. So I would have done it if I needed to. No one advised me that I needed to seek a lawyer. I didn’t know – I didn’t know that I needed to.

But your evidence previously, Dr Brecher, has been that you don’t need to be told when you need a lawyer, because you know from your experience in the US that you can get lawyers whenever you need to?---Yes, with legal issues, when I know something is a legal issue, like, for example, you know, with the employment with Kim Maslanka, the practice manager. I knew that that was a legal issue. When I know something is a legal issue I will do it. Always, 100 per cent of the time, I will get a lawyer.

233    In his evidence, Dr Brecher classified documents as “legal”, “financial” or “accounting” according to what he considered suited his interests at the time.

234    On 28 September 2015, Dr Brecher and Ms Hyratt exchanged Facebook messages which included:

Eric Brecher Jerins Monday, September 28, 2015 at 10:30am UTC+10

any word on rashid sweetie?

Eric Brecher Jerins Monday, September 28, 2015 at 10:30am UTC+10

i’m so nervous

Eric Brecher Jerins Monday, September 28, 2015 at 10:30am UTC+10

terible [sic]

Renee Traish Monday, September 28, 2015 at 10:31am UTC+10

coming down in a few mins

Renee Traish Monday, September 28, 2015 at 10:31am UTC+10

I just spoke with him

Renee Traish Monday, September 28, 2015 at 10:31am UTC+10

he is getting more documents prepared atm

Renee Traish Monday, September 28, 2015 at 10:31am UTC+10

so he will come in the next day or two to sit down together and go through it at once

Eric Brecher Jerins Monday, September 28, 2015 at 10:32am UTC+10

great sweetie

Eric Brecher Jerins Monday, September 28, 2015 at 10:32am UTC+10

it will save the company!

Eric Brecher Jerins Monday, September 28, 2015 at 10:32am UTC+10

let’s wrap this up asap

Eric Brecher Jerins Monday, September 28, 2015 at 10:32am UTC+10

we really need to have this done

235    Dr Brecher and Dr Rashid executed the “South Coast Medical Imaging Unit Trust Deed” and associated documents. These were dated 25 September 2015. It is unlikely they were executed on that day because, on 28 September 2015, these documents were sent to Dr Rashid with an instruction that they be executed. I conclude that they were executed on 28 September 2015 or shortly thereafter.

236    On 29 September 2015, Ms Hyratt sent to Dr Rashid the transfer of lease documents for the various leases relating to SCXR Dapto. These documents were only relevant to Dr Rashid if the agreement was for a merger of interests rather than simply the opening of a new radiology practice at Barrack Heights to be jointly owned by Dr Rashid and Dr Brecher.

237    On 30 September 2015, Dr Brecher and Ms Hyratt exchanged Facebook messages which included:

Eric Brecher Jerins Wednesday, September 30, 2015 at 10:50am UTC+10

we really have to get going with rashid!

    …

Renee Traish Wednesday, September 30, 2015 at 10:51am UTC+10