//
© 2026 Zoe. All rights reserved.
Zoe gives general legal information, not legal advice. For the authoritative text, check the official register of the law's own jurisdiction, such as the Federal Register of Legislation for Commonwealth laws.
[2026] NSWSC 362
General information, not legal advice.
Supreme Court of NSW
2026-04-16
Nixon J
Original judgment source is linked above.
Zoe will write a short plain-English brief of this judgment and email it to you: what it was about, what the court decided and why. It can take up to a minute.
General information, not legal advice.
Or create a free account to save it and ask Zoe follow-up questions.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Iverson Partners Inc v Care A2 Australia Pty Ltd [2026] NSWSC 362
Hearing dates: 31 March 2026
Date of orders: 16 April 2026
Decision date: 16 April 2026
Jurisdiction: Equity - Commercial List
Before: Nixon J
Decision: 1. Order that the First Defendant pay to the Plaintiff, within 28 days of the date of this order, the sum of $1,000,000, together with pre-judgment interest on that sum in the amount of $223,167.
2. Note that the Plaintiff consents, on the receipt of the amounts referred to in order (1) above, to the cancellation of its 2,000,000 shares in the First Defendant.
3. Dismiss the Summons as against the Second Defendant.
4. Order that the First Defendant pay the Plaintiff’s costs, as agreed or assessed.
5. Provisionally order that there be no order as to costs as between the Plaintiff and the Second Defendant. This order will take effect seven days after the date of this judgment unless the Second Defendant notifies the Plaintiff and the Associate to Nixon J in writing that some other order is sought, specifies the order and provides a brief statement of the grounds for it, in which event the order will not take effect and directions will be made to deal with costs as between the Plaintiff and the Second Defendant.
Catchwords: CONSUMER LAW – FINANCIAL SERVICES – MISLEADING OR DECEPTIVE CONDUCT – where first defendant made offer to plaintiff to subscribe for shares in first defendant prior to proposed initial public offering – where plaintiff accepted offer – where second defendant was sole director of first defendant – where third defendant made various representations to plaintiff prior to offer being made – whether third defendant made such representations as agent for and on behalf of first defendant – whether first defendant engaged in misleading or deceptive conduct by reason of representations made by third defendant and by sending offer letter to plaintiff – whether second defendant was involved in the alleged contravention by the first defendant – whether second defendant personally engaged in misleading or deceptive conduct by sending offer letter as agent for and on behalf of first defendant – whether plaintiff suffered loss and damage as a result of misleading or deceptive conduct – whether plaintiff is entitled to relief CONTRACTS – Breach of contract – whether share subscription agreement included an implied term that the first defendant would lodge a prospectus with ASIC in respect of the proposed initial public offering within a reasonable time – claim not established CIVIL PROCEDURE – where first and second defendants were unrepresented at time of hearing – where second defendant sent email to Chambers requesting adjournment and was informed that it would be necessary for an application to be made to the Court seeking an adjournment – where no such application made and no appearance by first or second defendant at hearing – hearing proceeded in absence of first and second defendants
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) ss 12BAA, 12BAB, 12BB, 12DA, 12GH, 12GM
Competition and Consumer Act 2010 (Cth) s 139B
Australian Consumer Law ss 4, 18, 237, 243
Uniform Civil Procedure Rules 2005 (NSW) rr 14.26, 29.7
Cases Cited: Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88
DSHE Holdings (Receivers & Managers Appointed) (In Liquidation) v Nicholas Abboud (No 3); National Australia Bank Limited v Nicholas Abboud (No 4) [2021] NSWSC 673
Productivity Partners Pty Ltd (t/as Captain Cook College) v Australian Competition and Consumer Commission (2024) 281 CLR 338; [2024] HCA 27
Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission (2023) 297 FCR 180; [2023] FCAFC 54
Take Off Opportunities Pty Ltd atf The Clear Runway Trust v Susan Quinn Pty Ltd atf The Susan Amelia Quinn Trust [2025] NSWSC 231
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65
Category: Principal judgment
Parties: Iverson Partners Inc (Plaintiff)
Care A2 Australia Pty Ltd (First Defendant)
Kerry Anne Hyland (Second Defendant)
Russell Cotton (Third Defendant)
Representation: Counsel:
J Hyde (Plaintiff)
No appearance for the Defendants
Solicitors:
Pikes & Verekers Lawyers (Plaintiff)
File Number(s): 2024/277095
Publication restriction: Nil
In July 2023, the Plaintiff, Iverson Partners Inc, subscribed for 2,000,000 ordinary shares in the First Defendant, Care A2 Australia Pty Ltd, at a price of $0.50 per share, representing a total investment of $1m.
Iverson claims that it agreed to subscribe for those shares in reliance on representations made by the Third Defendant, Mr Russell Cotton, which were made by him as agent for and on behalf of Care A2 Australia, and also in reliance on representations made in a letter of offer from Care A2 Australia that was signed by the Second Defendant, Ms Kerry Hyland, in her capacity as sole director of Care A2 Australia.
Iverson pleads that those representations were misleading or deceptive, or likely to mislead or deceive, in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) or alternatively s 18 of the Australian Consumer Law (ACL).
Although Mr Cotton was named as the Third Defendant, he has not been served with the Summons and the Commercial List Statement.
Iverson pleads that each of Care A2 Australia and Ms Hyland breached s 12DA of the ASIC Act and s 18 of the ACL and, further or alternatively, pleads that Ms Hyland was involved in Care A2 Australia’s contraventions of those provisions.
In addition, Iverson pleads that the share subscription agreement, which was entered on 18 July 2023, included an implied term that Care A2 Australia would lodge a prospectus with the Australian Securities and Investments Commission (ASIC) in respect of a proposed initial public offering (Proposed IPO) “within a reasonable time”, and that Care A2 Australia has breached this term in that Care A2 Australia has not lodged such a prospectus within a reasonable time or at all.
Iverson seeks an order that it be refunded the amount of its investment, together with interest, or alternatively damages.
Neither Care A2 Australia nor Ms Hyland appeared at the hearing of this matter.
Each of them had previously been represented by a solicitor, who served a notice of intention of ceasing to act on 9 February 2026, and who was subsequently granted leave to go off the record on 20 March 2026.
At the time this leave was granted, the former solicitor confirmed to the Court that he would inform Ms Hyland that, if she wished to appear for Care A2 Australia in this proceeding, she would need to make an application for leave to do so. No such application was made.
The orders setting this matter down for hearing were made more than seven months ago, on 22 August 2025.
At around 5pm on 25 March 2026, Ms Hyland sent an email to my Chambers requesting an adjournment of the hearing that was scheduled to start on 31 March 2026. Ms Hyland stated that:
“I am no longer legally represented in this matter as I cannot afford to pay the lawyers who previously represented me and the company. It is impossible for me to attend the Court to coherently represent myself nor do I have the presence of mind or stamina to be cross-examined on the material that has been filed in this matter on my behalf.”
Ms Hyland attached a “Medical Certificate” from Dr Naing of “Waratah Health Services” which stated as follows: “Ms Kerry Hyland, DOB XX/XX/1954 has come to consult with me and she is currently not in her mental state to attend the court on 31st March 2026”.
Ms Hyland made no reference to Care A2 Australia in her email of 25 March 2026 (other than to state that she and the company had previously been represented by the same solicitor). In particular, Ms Hyland did not state that she intended to apply for leave to appear for Care A2 Australia, and did not make any request for an adjournment on behalf of Care A2 Australia.
Ms Hyland sent a further email requesting an adjournment on the following morning.
In response to these requests, my Chambers informed Ms Hyland that:
I would not consider any request for an adjournment that was made by email;
if she wished to apply for an adjournment, she would need to make the application in Court, and could do so either in person or by a legal representative;
if she wished to make such an application, she should have available any affidavit or documents on which she relied in support of the application; and
if she did not make such an application (or if an application was made but was unsuccessful), the hearing would proceed as scheduled on 31 March 2026.
When the matter was called for hearing, there was no appearance by Ms Hyland. Nor did any person appear in order to seek leave to appear at the hearing on behalf of Care A2 Australia.
The principles concerning the non-appearance at a hearing by one party were recently addressed by Griffiths AJ in Take Off Opportunities Pty Ltd atf The Clear Runway Trust v Susan Quinn Pty Ltd atf The Susan Amelia Quinn Trust [2025] NSWSC 231. In particular, his Honour made the following observations at [14]–[18]:
“[14] In these circumstances, r 29.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that the Court may either proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or adjourn the trial. In circumstances where I am satisfied that Susan Quinn has been notified of the progress of the proceedings on multiple occasions, including of the final hearing, I considered it appropriate to proceed with the hearing. As Black J noted in Re Central Management (NSW) Pty Ltd (in liq) [2017] NSWSC 1258 at [2], a defendant’s right to be heard is ‘not a right to frustrate the hearing of proceedings by not attending them’.
[15] In adopting this course, I note r 36.16(2)(b) of the UCPR, which empowers the Court to set aside or vary a judgment or order after it has been entered if ‘it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order’ (emphasis added).
[16] Notwithstanding Susan Quinn’s absence, Take Off must ‘prove its claim so far as the burden of proof lies upon it and if it proves its claim is entitled to the relief claimed and such other relief as is consistent therewith’ (Re Anton Fabrications (NSW) Pty Ltd — Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; 248 FLR 384 at [11] per Ward J (as the President then was)).
[17] I am satisfied that Susan Quinn has been served with all relevant documents and been afforded ample opportunity to attend and be heard.
[18] The defendant’s non-attendance does not mean that the plaintiff becomes liable to a more demanding obligation to assist the Court as would apply if, for example, the defendant was absent because the Court was dealing with an ex parte application. I respectfully agree with Barrett J’s observations in Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 at [68] where, after referring to several authorities, including Isaacs J’s observations in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72 at 681 concerning a ‘most serious responsibility’ imposed upon a party who comes to court seeking relief in the absence of the other party, Barrett J stated:
‘It seems to me that the “most serious responsibility” to which Isaacs J referred is attracted only in those cases where a party has not been given proper notice of a hearing and is absent when an application is pressed. In those cases, the applicant is obliged to bring to the court’s attention all relevant facts known to the applicant, including those unhelpful to the applicant’s case. That “most serious responsibility” is not attracted if the defendant has been served and given ample opportunity to attend. Such a defendant’s non-attendance does not give rise to an entitlement to some especially favourable treatment. The plaintiff is, in such a situation, under the generally prevailing obligation to assist the court and not to mislead it. If the case is one of interlocutory hearing of the “limited inquiry” type to which Young J referred, the duty to assist the court is particularly pronounced. But where, as here, the application is an application for final relief and the defendant has not only received the originating process and supporting affidavit but also presented a somewhat relaxed demeanour in the face of the claim (see paras [42]–[45] above), it seems to me that the duty or expectation is confined to honestly [sic], frankness and absence of conduct apt to mislead the court in relation to any material matter.’”
I am satisfied that Care A2 Australia and Ms Hyland have been served with all relevant documents (having previously been legally represented until a short time ago) and have been afforded ample opportunity to attend and be heard. In particular, it is plain, having regard to the matters set out above, that Ms Hyland and Care A2 Australia (through its sole director, Ms Hyland) were aware of the hearing date and were aware that, unless any adjournment application was made (and was successful), the hearing of this matter would go ahead, as scheduled.
In those circumstances, I determined to proceed with the trial in accordance with r 29.7(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), and in accordance with the principles set out in the passage from Take Off Opportunities that is quoted above. As is clear from those principles, Iverson must, notwithstanding the absence of Care A2 Australia and Ms Hyland, prove its claim against them in order to obtain relief.
Iverson read two affidavits of Mr Chee Kong Sun, sworn on 9 July 2025 and 10 September 2025. Mr Sun and his wife, Ms Tan, are the beneficial owners of Iverson.
The findings set out below are based on Mr Sun’s affidavit evidence, and Iverson’s documentary tender (which consisted, for the main part, of documents exhibited to Mr Sun’s two affidavits).
Iverson was incorporated in the British Virgin Islands on 24 September 2014.
There are two shares in Iverson. The legal owner of those shares is Anchorman Ltd, which is also incorporated in the British Virgin Islands. Anchorman holds those two shares as nominee for, respectively, Mr Sun and Ms Tan.
Mr Sun and Ms Tan reside in Malaysia.
Iverson was set up as an investment vehicle for Mr Sun and Ms Tan. Its primary activities have been to invest in financial instruments such as stocks, bonds and mutual funds.
Anchorman is the director of Iverson. As beneficial owners of Iverson, Mr Sun and Ms Tan have made decisions about its investments since its incorporation, and have communicated those decisions to Anchorman, which has then implemented those decisions.
Care A2 Australia was incorporated on 28 August 2017. It was previously named Acell Australia Pty Ltd until 29 June 2020, when it took its current name.
At all times since June 2020, Ms Hyland has been the sole director of Care A2 Australia.
There are currently around 609m ordinary shares on issue in Care A2 Australia, held by around 50 shareholders, with the total amount paid in respect of those shares being approximately $38m. Other than in respect of Iverson’s shares, there is no evidence as to when those shares were issued, or on what terms.
Mr Sun and Ms Tan first met Mr Cotton in around 2007, when Mr Cotton was a real estate agent. Mr Sun and Ms Tan dealt with Mr Cotton in relation to some real estate investments in Australia and became friends with him. However, they had no contact with him from around mid-July 2019 until July 2023.
In July 2023, Mr Cotton sent messages, via WhatsApp, to Mr Sun, arranging a lunch with him and Ms Tan at a restaurant in Kuala Lumpur, Malaysia.
At their lunch meeting on 13 July 2023, Mr Cotton had a lengthy conversation with Mr Sun about Care A2 Australia and a proposed listing of that company on the Australian Securities Exchange (ASX). Mr Cotton also provided Mr Sun, in the course of this meeting, with a pdf copy of a “Care A2+ Distributor Handbook” dated May 2023.
Following this lunch, Mr Sun and Mr Cotton exchanged a number of WhatsApp messages during the evening of 13 July 2023, which are central to Iverson’s claim. These messages are set out in some detail below.
Between 5.33pm and 5.40pm on 13 July 2023, Mr Cotton sent Mr Sun the following messages:
“I double checked with the Founder and you can do $A500K to $A1M at 0.50c pre IPO.”
“It’s closed off to everyone else”
“This is the latest draft prospectus with forecasts”
[Link to pdf document]
“The product has been on the shelves for 2 years. The forecasts factor in the US, SEA, UAE and India. I’m driving the car re distribution”
“The forecasts don’t include China”
The pdf document provided by Mr Cotton to Mr Sun was a prospectus issued by Care Corporation Limited which was dated 18 May 2023, and which was issued in respect of an “Employee Gift Offer” (Care Corporation Prospectus). The Employee Gift Offer was described as “an invitation to Eligible Gift Employees to acquire fully paid ordinary shares … in Care Corporation”. The Care Corporation Prospectus stated that the Employee Gift Offer was made “[i]n connection with the proposed listing of Care Corporation Limited on the Australian Securities Exchange”.
The Employee Gift Offer defined “Eligible Gift Employees” as being persons who had been continuously employed by Care Corporation on a permanent basis between 1 September 2022 and the allotment date for the issue of shares under the Employee Gift Offer. The Care Corporation Prospectus stated that, as at the date of the Employee Gift Offer, there were three Eligible Gift Employees. The total number of shares to be issued pursuant to the Employee Gift Offer was 1,500 shares in Care Corporation.
Ms Hyland was named in the Care Corporation Prospectus as a non-executive director of Care Corporation. The Care Corporation Prospectus included a “corporate structure” chart which indicated that Care Corporation was related to various other corporate entities (but which did not contain any reference to Care A2 Australia).
The Care Corporation Prospectus included financial forecast information, which projected a net profit of $0.339m for FY23, $59.752m for FY24 and $105.713m for FY25.
Shortly after Mr Cotton provided the Care Corporation Prospectus to Mr Sun, they exchanged the following messages between 6:12pm and 6:26pm on 13 July 2023:
Mr Sun: “Thanks. When do the company plan to submit the listing application to ASX?”
Mr Cotton: “Submitting 18th July”
“Listing 22nd August”
“Need to get you in before the 18th”
The reference in the last of these messages to “the 18th” was, when read in context, plainly a reference to 18 July 2023. Mr Cotton was conveying to Mr Sun that there was an urgent need for Iverson to commit to investing in Care A2 Australia prior to the proposed listing application being made on that date. It should be noted that these messages were sent after business hours on Thursday, 13 July 2023, and represented that a listing application would be submitted on Tuesday, 18 July 2023 (that is, just three business days later).
Having received this information, Mr Sun asked Mr Cotton some further questions shortly afterwards. In particular, they exchanged the following messages between 6:30pm and 6:46pm:
Mr Sun: “What happen if application not successful?”
“Do we get the money back?”
Mr Cotton: “Yes if the application is not successful within 90 days you will get your money back”
Mr Sun: “Ok”
Mr Cotton: “Care will provide the application to purchase the shares with that clause”
Mr Sun: “I read the prospectus, It does not says [sic] ipo price 0.70 anywhere. Is it firm?”
Mr Cotton: “0.75c is firm”
Mr Sun: “Which document to find this info??”
In response to the last of the questions set out above, Mr Cotton sent Mr Sun a photograph of part of page 6 of the Care Corporation Prospectus, which referred to a market capitalisation of around $636.5m at the time of completion of this offer, and which provided the following footnote to this figure: “Assuming a Share price of $0.75 at the time of ASX listing, however the Company notes that the Shares may trade above or below this price”.
Mr Sun deposed that, although he stated in his message to Mr Cotton that he had “read the prospectus” that had been sent to him earlier on the same evening, he had only looked at this document briefly, and did not notice at that time that it was for a company called Care Corporation, or was for a limited share issue of 1,500 shares to “Eligible Gift Employees”.
“Morning CK, If you send your company details they will prepare an application to purchase shares with all the details and constitution for your review. Rus”.
Mr Sun: “Can I get confirmation in writing of the buyback of the shares if the listing does not go ahead?”
Mr Cotton: “Yes, I can get that for you.”
“The founder has confirmed a minimum buy back of 0.75c in 12 months which signed by the Director of the company.”
“Also if the listing does not take place within 90 days from lodgement the funds will be refunded.”
“Can’t get you better than that [winking face emoji]”
On 15 July 2023, shortly after Mr Cotton had sent the messages set out in the previous paragraph, Ms Tan sent an email to Ms Dora Loke, copied to Mr Cotton and Mr Sun. Ms Loke was a director of Anchorman (which, as noted above, is the director of Iverson). Ms Tan asked Ms Loke to provide certain information that was required by Mr Cotton for the preparation of documents for “purchases of pre-ipo shares – Care A2plus in ASX”. Ms Tan referred to Mr Cotton as “the Global Business Development Manager”. (This reflected the footer of Mr Cotton’s emails, which described him as the Global Business Development Manager for Care A2 Plus Pty Ltd. His email address was “russell@carea2plus.com”.)
On Monday, 17 July 2023 at 10:03am, Ms Loke provided the requested information to Mr Cotton.
On the same day, Mr Cotton forwarded Ms Loke’s email to Ms Hyland and Mr Dominic Galati. The email chain which Mr Cotton forwarded included the reference to himself as being “Global Business Development Manager”. Mr Cotton’s email to Ms Hyland and Mr Galati was in the following terms:
“Hi Kerry,
As discussed with Dominic please see below.
Please prepare an offer to acquire shares for 2M shares at 0.50c equating to A$1M.
The two conditions are;
1.The option of a minimum buy back from Care A2 at 0.75c of the investors 2M shares within 12 months of Care being listed on the ASX.
2. The $1M will be refunded if Care is not listed on the ASX within 90 days of the prospectus being lodged.
Please send to me and I will forward to my investor.”
There was no evidence that Mr Galati had any direct dealings with Iverson, and there was no documentary evidence regarding Mr Galati’s role, if any, at Care A2 Australia as at July 2023. (According to the ASIC company search for Care A2 Australia, Mr Galati had previously been a director of that entity for a short period from October 2019 to February 2020.)
It should be noted, however, that Mr Cotton’s email of 17 July 2023 refers to previous discussions with Mr Galati about the subject matter of this email, namely, the proposed investment by Iverson and the two conditions for this investment. Accordingly, it is likely that Mr Cotton’s references, in his WhatsApp messages with Mr Sun on 13 July 2023 and on 15 July 2023, to Mr Cotton having contemporaneous discussions with “the founder” about Iverson’s investment and specifically about the two conditions which are set out in his email of 17 July 2023 (see paragraphs [35] and [48] above) are references to discussions with Mr Galati. In contrast, Mr Cotton’s email to Ms Hyland is expressed in terms which suggest that there had not been any previous discussion with her in relation to the matters contained in the email, and that this information was being provided to her at that point in time so that she could take the administrative step of “preparing an offer” that set out the terms which, on the instructions of “the founder”, had already been conveyed by Mr Cotton to Mr Sun on behalf of Care A2 Australia, and which were to be formally recorded in a letter “signed by the Director of the company” (see paragraph [48] above).
Shortly after receiving Mr Cotton’s request to “prepare an offer” with the specified terms, Ms Hyland sent to Mr Cotton, copied to Mr Galati, an email that was addressed to “Ms Lok” (that is, Ms Dora Loke). In this email, Ms Hyland thanked Ms Loke “for taking the time to look at the opportunity to invest in Care A2+ Infant and Toddler Formula”, and attached three documents to “assist you and your financial advisers”, being a letter of offer, a copy of the constitution of Care A2 Australia, and a sophisticated investor certificate. Ms Hyland requested that the completed documents be sent back to her and to the Care A2 Australia share registry. That afternoon, Mr Cotton forwarded Ms Hyland’s email and its attachments to Mr Sun, Ms Tan and Ms Loke.
The letter of offer attached to this email was on Care A2 Australia’s letterhead, was addressed to the directors of Iverson, was dated 17 July 2023, and was signed by Ms Hyland as director of Care A2 Australia (the 17 July Offer Letter). By this letter, Ms Hyland confirmed that “[Care A2 Australia] is willing to offer [Iverson] 2,000,000 fully paid ordinary shares in [Care A2 Australia] … at AUD$0.50 per share on the terms of the share subscription agreement … attached to this letter”.
The 17 July Offer Letter stated that:
“As [Care A2 Australia] currently has a large number of shareholders, it is proposed that the Subscription Shares issued to you be registered in the register of members in the name of Care A2 Holdings Pty Ltd ACN 648 815 847 (the Nominee) to be held on your behalf under a bare trust arrangement. This letter contains information about the bare trust arrangement.”
The 17 July Offer Letter included sections headed “What is the bare trust arrangement?”, “Why is the bare trust arrangement being undertaken?” and “How will the arrangement work?”.
The form of share subscription agreement that was attached to the 17 July Offer Letter was signed by Ms Hyland as sole director of Care A2 Australia, and was dated 17 July 2023. Iverson did not execute this agreement because it related to the proposed bare trust arrangement and, as explained below, Iverson was unwilling to invest in Care A2 Australia on the basis of any such arrangement.
Iverson did not advance any allegations of misleading conduct based on the contents of the 17 July Offer Letter.
Mr Sun: “Hi Russell, I have reviewed the documents you email[ed]. Everything ok except the shares to be issue[d] to trust account. If shares can’t deposit to my trading account, I will pass this offer. Thanks”
Mr Cotton: “Ok Let me revert”
“You mean the bare trust?”
Mr Sun: “Yes”
Mr Cotton: “Ok”
By these messages, Mr Sun indicated that Iverson was not willing to accept the bare trust arrangement that was proposed in the 17 July Offer Letter.
At 2:33pm on 18 July 2023, Ms Hyland sent to Mr Cotton a further email which was addressed to Ms Loke. This email attached a revised letter of offer dated 18 July 2023 (the 18 July Offer Letter), an “Application for Shares” form in relation to the proposed issue of 2,000,000 ordinary shares in Care A2 Australia, a sophisticated investor certificate, and a copy of Care A2 Australia’s constitution.
The 18 July Offer Letter is central to Iverson’s claims for breach of contract, and also to Iverson’s claims for misleading or deceptive conduct against Ms Hyland. The 18 July Offer Letter was on Care A2 Australia’s letterhead, was dated 18 July 2023, was addressed to the directors of Iverson, and was signed by Ms Hyland as director of Care A2 Australia. Given its importance to Iverson’s claims, I have set out the full text of this letter below (omitting formal parts, emphasis in original):
“RE: OPPORTUNITY TO AQUIRE FULLY PAID ORDINARY SHARES IN CARE A2 AUSTRALIA PTY LTD (ACN 621 347 000) (the ‘Company’)
We refer to our recent communication with you regarding the opportunity to acquire fully paid Ordinary (‘Shares’) in the Company.
The Company is prepared to offer you 2,000,000 fully paid Ordinary Shares in the Company (Subscription Shares) at AUD$0.50 per share on the terms of the [sic] (‘Subscription Price’).
The terms of the Shares offer are that two conditions are met:
- The option of a minimum buy back from the company at AUD $0.75c for the investor’s two million shares within 12 months of the company being listed on the ASX; and
- The $1,000,000 will be refunded if the company is not listed on the ASX within 90 days of the prospectus being lodged.
The Company’s Constitution is attached to this letter for further reference.
If you are interested in acquiring Shares in the Company, please fill out the enclosed Application for Shares letter and return it to the Company.
If you qualify as a sophisticated investor, i.e. Your net assets exceed AUD$2.5M OR your gross income for the last two financial years was at least AUD$250,000, then please ask your accountant to complete the attached certificate to certify that you are a ‘sophisticated investor’ for the purposes of Chapter 6D of the Corporations Act 2001 (Cth). These certificates are valid for 2 years after issue.”
Mr Cotton: “Updated docs sent CK [Mr Sun]. You are now not part of the Bare Trust.”
Mr Sun: [thumbs up emoji]
“We are agreeable with the new terms and conditions for applying the pre-ipo Care A2 shares.
Please help to executive [sic] the necessary documents.”
“I understood from the Hyland letter that it confirmed what Mr Cotton had told me in the WhatsApp messages set out in paragraphs 21, 26 and 27 above [being the messages referred to in paragraphs [35], [40], [47], and [48] of these reasons for judgment], namely that the investment would be of low risk because it included terms that Iverson would be able to require Care A2 to buy back the shares at AUD0.75c within 12 months of the first defendant being listed on the ASX and, more importantly, the AUD1,000,000 investment would be refunded if the first defendant was not listed on the ASX within 90 days of the Prospectus being lodged. I then decided that Iverson should invest in purchasing 2,000,000 shares in the first defendant. If Mr Cotton had not made the statements set out in paragraphs 21, 26 and 27 above and I had not received the Hyland letter, I would not have decided that Iverson would make any investment in shares in the first defendant.
I then discussed with my wife Iverson investing in the purchase of 2,000,000 shares in the first defendant and we agreed that it should do so.”
Iverson did not complete or return a sophisticated investor certificate to Care A2 Australia.
On 19 July 2023, Ms Hyland sent an email to Ms Loke (copied to Mr Sun, Ms Tan and Mr Cotton) stating that the “Board” had accepted the share application from Iverson. (As previously noted, Ms Hyland was the sole director of Care A2 Australia.) Ms Hyland provided the details of Care A2 Australia’s account with the Commonwealth Bank of Australia (Care A2 Account) for payment of the subscription moneys.
On 20 July 2023, Iverson transferred the sum of $1m to the Care A2 Account.
On 25 July 2023, Ms Hyland sent an email to Ms Loke, copied to Mr Cotton, confirming that Iverson’s share certificate had been issued and approved by the board of directors of Care A2 Australia. A holding statement was attached, which was signed by Ms Hyland as director of Care A2 Australia, and which recorded that 2m ordinary shares had been issued to Iverson on 21 July 2023.
As set out at paragraph [40] above, Mr Cotton had, on 13 July 2023, represented to Mr Sun that the application to list Care A2 Australia on the ASX would be lodged on 18 July 2023, with listing expected to occur on 22 August 2023.
On 21 August 2023, Mr Sun and Mr Cotton exchanged the following WhatsApp messages:
Mr Sun: “Hi Russell.. any update on the k2 ipo progress?”
Mr Cotton: “Hey CK [Mr Sun]. We will be lodging with the ASX this week. Updated audited accounts will be completed Wednesday.”
No application to list Care A2 Australia on the ASX was lodged in August 2023, or has been lodged at any time since then. Further, Iverson has never received any financial statements or financial information concerning Care A2 Australia.
By late 2023, Mr Sun became concerned that Care A2 Australia had not been listed on the ASX, and he had not been informed of any progress with such listing, and so he approached Mr Cotton to see if Iverson’s shares could be sold to another investor. He and Mr Cotton exchanged a number of messages from late 2023 into early 2024, in which Mr Cotton indicated that he expected to have “someone locked away” and had “someone close on your shares”, and stated that a potential buyer was obtaining taxation advice. However, in March 2024, Mr Cotton ceased responding to Mr Sun’s messages.
On 2 May 2024, Iverson’s then solicitors, Lincolns, sent a letter of demand to Care A2 Australia, which included the following statements:
“1. We act for Iverson Partners Inc. and its shareholders, Mr Chee Kong Sun and Ms. Ying Ying Tan. We refer to the above matter.
- We are instructed by our client that as at early July 2023, your Russell Cotton, Global Business Development Manager of Care A2 Australia Pty Ltd (‘Company’) represented to our client (including its shareholders):
(a) The Company offered to sell 2 million units of its ordinary shares (‘Shares’) for AUD $1,000,000 (‘Purchase Price’). The price per unit is AUD $0.50;
(b) On 13 July 2023, Russell forwarded a copy of the Care A2+ Distributor Handbook dated May 2023 and the latest draft prospectus with forecasts to our client;
(c) The Company would be submitting the listing application to Australian Securities Exchange Ltd (‘ASX’) on 18 July 2023 and the listing would be on 22 August 2023;
(d) The purchase of the Shares has to be completed before 18 July 2023, the date of submitting the listing application to ASX; and
(e) In the event the application for listing of the Company is not successful within 90 days, the Purchase Price would be refunded to our client.
A copy of the relevant representations made by Russell Cotton dated 13 July 2023 is attached herein for your attention
- In reliance of Russell Cotton’s representation, on 18 July 2023, our client transferred the sum of $1,000,000 to the Company for the purchase of the Shares (‘Purchase Transaction’). An application for shares certificate to formalise the transaction was executed by the Company and our client on the same day.
…
- In light of the above, it is our client’s position that the conditions precedent listed in paragraphs 2(c), (d) and (e) have not been fulfilled. Therefore, the Purchase Transaction is terminated and the Purchase Price shall be refunded to our client immediately.
- Further and/or alternatively to the above, contrary to Russell Cotton’s representations stated in paragraph 2(a) to (e) above,
(a) The Company failed to submit the listing application to ASX on 18 July 2023;
(b) The Company was not listed on 22 August 2023; and
(c) Our client did not receive the refund of the Purchase Price when the Company failed to list on the ASX.
- Our client instructs us that as at 2 May 2024, the total amount due and owing by the Company to our client is $1,000,000 plus interests of 10% per annum, being the loss of use funds.
- In the circumstances, we are instructed by our client to demand from you, which we hereby do, payment sum of $1,000,000 plus interests of 10% per annum, being the loss of use funds into our trust account.
…
- TAKE NOTICE that in the event the aforesaid sum is not paid to our client within 7 days from the date of this letter, our client reserves its right to make claim against you.”
Iverson has not received any refund of the amount that it paid for the subscription shares, or any other payment from Care A2 Australia.
On 25 July 2024, Iverson commenced this proceeding.
In March 2026, Iverson served on Care A2 Australia a notice to produce to the Court any prospectus or draft prospectus prepared with respect to any proposed IPO or listing of Care A2 Australia on the ASX. There was no compliance with this notice. I infer that no such document exists.
Iverson pleaded that Mr Cotton “as agent for and on behalf of Care A2” made three sets of representations to Mr Sun and Ms Tan on behalf of Iverson.
Care A2 Australia did not, in its Commercial List Response, deny that these representations were made by Mr Cotton, but did deny that Mr Cotton had “actual authority” to “make binding representations on behalf of Care A2 [Australia]”. (I address the issue of authority below.)
The first set of representations – described as the IPO Representations – were alleged to have been made by Mr Cotton on 13 July 2023 and to have been in the following terms (Commercial List Statement, paragraph [5]):
“there was an opportunity available for the plaintiff to invest by subscribing for shares in a company producing A2 toddler and infant formula products (the Proposed Listing Company) prior to [the Proposed IPO] and/or listing of the Proposed Listing Company on [the ASX]”;
“the subscription price for the shares in the Proposed Listing Company would be AUD0.50”;
“the list price for the said shares at the commencement of the IPO would be AUD0.75”;
“subscriptions for shares in the Proposed Listing Company had closed but the Proposed Listing Company would allow [Iverson] to subscribe for up to 2,000,000 shares, provided that [Iverson] subscribed and paid for its shares on or before 18 July 2023”;
“the Proposed Listing Company proposed to submit its listing application to the ASX by 18 July 2023”; and
“the Proposed Listing Company would be listed by 22 August 2023”.
I am satisfied that each of the IPO Representations was made. Mr Cotton informed Mr Sun and Ms Tan at their lunch meeting on 13 July 2023 of the proposed listing of Care A2 Australia on the ASX (paragraph [33] above), and expressly stated in WhatsApp messages sent to Mr Sun on 13 July 2023 that:
the subscription price was AUD0.50 per share (paragraph [35] above);
the listing price of AUD0.75 per share was “firm” (paragraph [43] above);
the opportunity to subscribe for shares was “closed off to everyone else”, but Care A2 Australia was willing to offer “$A1M at 0.50c pre IPO” (that is, 2m shares by way of a pre-IPO subscription), but for this to occur it was necessary “to get [Iverson] in before the 18th [July 2023]” (see paragraphs [35] and [40] above); and
the application for listing on the ASX was going to be submitted by 18 July 2023, with listing expected to occur by 22 August 2023 (see paragraph [40] above).
The second pleaded representation by Mr Cotton – described as the Prospectus Representation – was that the document which Mr Cotton provided to Mr Sun by way of a WhatsApp message on 13 July 2023 was “the latest draft prospectus with forecasts in respect of the proposed IPO and listing of the Proposed Listing Company” (Commercial List Statement, paragraph [6]).
I am satisfied that the Prospectus Representation was made.
In providing a link to Care Corporation’s prospectus for its Employee Gift Offer on 13 July 2023, Mr Cotton stated that “[t]his is the latest draft prospectus with forecasts”, made a number of further comments regarding the countries which were “factor[ed]” into the forecasts, and noted that China was not included in the forecasts (see paragraph [35] above).
In circumstances where Mr Cotton and Mr Sun were discussing and exchanging messages, on 13 July 2023, about an imminent application to list Care A2 Australia on the ASX, and an offer to subscribe for pre-IPO shares in Care A2 Australia, Mr Cotton’s statement that “[t]his is the latest draft prospectus with forecasts” conveyed that the attached document was a draft prospectus that had been prepared for the Proposed IPO in respect of Care A2 Australia, and that the forecasts contained in that document were forecasts for Care A2 Australia.
The third pleaded representation by Mr Cotton – described as the Refund Representation – was in the following terms: “if Proposed Listing Company’s application for listing on the ASX was not successful within 90 days, the Proposed Listing Company would refund [Iverson’s] investment” (Commercial List Statement, paragraph [7]).
I am satisfied that the Refund Representation was also made by Mr Cotton. In particular, Mr Cotton sent Mr Sun WhatsApp messages on 13 and 15 July 2023 respectively, which stated as follows (see paragraphs [42] and [48] above):
“if the application is not successful within 90 days you will get your money back”
“if the listing does not take place within 90 days from lodgement the funds will be refunded”
As noted above, Iverson pleaded that each of these three sets of representations was made by Mr Cotton “as agent for and on behalf of” Care A2 Australia.
In response to this allegation, Care A2 Australia and Ms Hyland pleaded as follows in their Commercial List Response (paragraph [C2]):
“The Third Defendant, Mr Russell Cotton, was engaged by Care A2 [Australia] as an external consultant for the limited purpose of introducing potential investors. He was not an officer or employee of the company. He possessed no actual authority to negotiate, vary, or finalise the terms of any investment, nor to make binding representations on behalf of Care A2 [Australia] concerning the timing or conditions of a future Initial Public Offering (IPO). The First Defendant at no time represented to the Plaintiff that Mr Cotton had such authority.”
(2) Any conduct engaged in on behalf of a body corporate:
(a) by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent…
is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the body corporate.
(2) Any conduct engaged in on behalf of a body corporate:
(a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; …
is taken, for the purposes of this Division, to have been engaged in also by the body corporate.
“It can be seen that the subsection contains two elements. First, it applies to conduct engaged in on behalf of a body corporate. If the conduct is not engaged in on behalf of the body corporate, the subsection has no application. Second, the subsection applies to such conduct if it is engaged in by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent. Again, if the conduct is not engaged in by such a person within that authority, the subsection has no application.
Section 139B(2) of the CCA derives from s 84(2) (see the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) at [18.35]). The principles applicable to s 84(2) are equally applicable to s 139B(2): Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408 at [280] (Gleeson J). Drawing upon the principles established with respect to s 84(2) of the CCA, the primary judge discussed the meaning of the two phrases ‘on behalf of the body corporate’ and ‘within the scope of the actual or apparent authority’ at PJ [110]–[115]. The principles were also recently discussed in Australian Competition and Consumer Commission v BlueScope Ltd (No 5) [2022] FCA 1475 (BlueScope) (at [154]–[160]). Drawing upon the discussion in the primary judgment and in BlueScope (and relying upon the authorities referred to therein), the following matters can be noted:
(a) First, the phrase ‘on behalf of the body corporate’ conveys a meaning similar to the phrase ‘in the course of the body corporate’s affairs or activities’.
(b) Second, the phrase ‘within the scope of the person’s actual or apparent authority’ invokes common law principles concerning the authority of employees and agents.
(c) Third, the scope of a person’s actual authority (whether as employee or agent) is ascertained from the terms of the contract governing the relationship.
(d) Fourth, apparent (or ostensible) authority arises from a representation made by the principal as to the scope of authority. The representation which creates the apparent authority may take a variety of forms of which the most common is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons.
(e) Fifth, it will usually be the case that the actual authority of an employee or agent does not extend to the commission of unlawful acts. Nevertheless, s 139B(2) will apply where the unlawful conduct is within the scope of the apparent authority of the employee or agent. This will be so where the employee or agent has authority to enter into transactions of the sort in question.”
“The agents were contracted by the College to promote and market the courses offered by the College. As found by the primary judge, the conduct engaged in by the agents was undertaken for the purpose of signing up Consumers A, B, D and E to the College’s courses for the benefit of the College … As such, the conduct was undertaken in the course of the College’s affairs or activities.”
“(a) the relevant agency agreements required the agent to ensure that prospective students were informed that the agent was providing sales services ‘as an agent’ for the College;
(b) by styling the agent as a ‘course advisor’ for the College and sending the agent into the field as such, the College held out to the world that the agent would have the usual or expected authority of a course advisor, which gave the agent the apparent authority to make representations on behalf of the College with regard to enrolment; and
(c) the contravening conduct occurred in the course of recruiting persons as students, which was conduct the agent was authorised to engage in.”
There was no appeal from this aspect of the Full Court’s reasoning: Productivity Partners Pty Ltd (t/as Captain Cook College) v Australian Competition and Consumer Commission (2024) 281 CLR 338; [2024] HCA 27.
I am satisfied that Mr Cotton’s dealings with Mr Sun and Ms Tan in relation to the pre-IPO share subscription offer constituted conduct which Mr Cotton engaged in on behalf of Care A2 Australia. Care A2 Australia acknowledged, in its Commercial List Response, that Mr Cotton was engaged by Care A2 Australia for the purpose of finding “potential investors” and “introducing” them to the opportunity to invest in Care A2 Australia. Mr Cotton’s dealings with Mr Sun and Ms Tan were undertaken for the purpose of introducing Iverson to an opportunity to invest in Care A2 Australia by way of a pre-IPO subscription for 2m shares. He was, in the course of those dealings, communicating with the sole director of Care A2 Australia (Ms Hyland) regarding this proposed investment (see, for example, paragraphs [51] and [54] above). Having regard to those matters, Mr Cotton’s dealings with Iverson in relation to an offer to subscribe for shares in Care A2 Australia – and the representations made by him in the course of those dealings – constituted conduct that was undertaken in the course of Care A2 Australia’s affairs or activities, and therefore constituted conduct on behalf of Care A2 Australia.
In addition, I am satisfied that the relevant conduct was within the scope of Mr Cotton’s apparent authority, having regard to the following matters:
Mr Cotton was, like Ms Hyland, provided with an “@carea2plus.com” email address and, to Care A2 Australia’s knowledge, used this email address to communicate with Iverson regarding the pre-IPO share subscription offer (see, for example, paragraphs [49]-[52] and [62] above);
Mr Cotton was, to Care A2 Australia’s knowledge, styling himself as the “Global Business Development Manager” for Care A2 Australia in his dealings with Iverson regarding the pre-IPO share subscription offer (see paragraphs [49]-[51] above); and
the relevant conduct occurred in the course of introducing a potential investor (Iverson) to the opportunity to subscribe for shares in Care A2 Australia, which – according to Care A2 Australia’s pleading – was conduct that Mr Cotton was authorised to engage in.
For those reasons, I am satisfied that, pursuant to s 139B(2) of the Competition and Consumer Act and s 12GH(2) of the ASIC Act, the conduct of Mr Cotton in making the IPO Representations, the Prospectus Representation and the Refund Representation is taken to be conduct that was also engaged in by Care A2 Australia.
Iverson pleaded that the IPO Representations were misleading or deceptive, or likely to mislead or deceive, by reason of the following matters (Commercial List Statement, paragraph [18]):
at no time had a prospectus been prepared, or lodged with either ASIC or the ASX in respect of Care A2 Australia;
no application for the listing of Care A2 Australia on the ASX had been prepared on or before 18 July 2023; and
there was no prospect or possibility that Care A2 Australia would be listed on the ASX by 22 August 2023.
Care A2 Australia and Ms Hyland did not, in their Commercial List Response (which was prepared and filed at a time when they were legally represented), traverse the allegation that the IPO Representations were misleading or deceptive. It follows that this allegation is taken to be admitted by them: UCPR, r 14.26(1).
I am satisfied that, by making the IPO Representations, Care A2 Australia engaged in conduct that was misleading or deceptive, or likely to mislead or deceive. In particular, the representations that a listing application would be submitted to the ASX by 18 July 2023 and that the listing of Care A2 Australia on the ASX would occur by 22 August 2023 were representations as to future matters, within the meaning of s 4 of the ACL and s 12BB of the ASIC Act. No evidence has been adduced by the Defendants to establish that Care A2 Australia had reasonable grounds for those representations, and therefore it is taken not to have had such grounds, and the representations are taken to be misleading: ACL, s 4(1)-(2), and ASIC Act, s 12BB(1)-(2). Further, and in any event, the fact that no draft prospectus was prepared with respect to any proposed IPO or listing of Care A2 Australia on the ASX establishes that Care A2 Australia did not have reasonable grounds for those representations.
Iverson pleaded that the Prospectus Representation was misleading or deceptive, or likely to mislead or deceive, by reason of the following matters (Commercial List Statement, paragraph [19]):
the prospectus which Mr Cotton provided to Mr Sun on 13 July 2023 (being the Care Corporation Prospectus) was in respect of the proposed issue of 1,500 shares to employees of Care Corporation;
the Care Corporation Prospectus had no relation to Care A2 Australia; and
the Care Corporation Prospectus was not in respect of a proposed IPO or listing on the ASX of Care A2 Australia.
Care A2 Australia and Ms Hyland did not, in their Commercial List Response, traverse any of these matters and, accordingly, they are taken to be admitted.
I am satisfied that, by making the Prospectus Representation, Care A2 Australia engaged in conduct that was misleading or deceptive, or likely to mislead or deceive. In particular, the representation that the document which Mr Cotton sent to Mr Sun was the “latest draft prospectus” for the Proposed IPO and listing of Care A2 Australia on the ASX was false. It was a document prepared for a limited offer of 1,500 shares to three employees of a different company.
Iverson pleaded that the Refund Representation was misleading or deceptive, or likely to mislead and deceive, by reason that no application for listing of Care A2 Australia on the ASX was either contemplated or possible within 90 days of 18 July 2023 or any reasonable time thereafter (Commercial List Statement, paragraph [20]).
Care A2 Australia did not, in its Commercial List Response, traverse any of these matters and, accordingly, they are taken to be admitted.
I am satisfied that, by making the Refund Representation, Care A2 Australia engaged in conduct that was misleading or deceptive, or likely to mislead or deceive. In particular, the representation that if the application for listing on the ASX was not successful within 90 days, Iverson’s investment would be refunded within 90 days was misleading because, when made in the context of (and shortly after) the IPO Representations (including the representation that an application for listing would be submitted on 18 July 2023), it conveyed that Iverson could expect to receive a refund of its investment if no listing had occurred within 90 days of 18 July 2023, namely, by 16 October 2023. This was a representation as to a future matter, within the meaning of s 4 of the ACL and s 12BB of the ASIC Act. No evidence has been adduced by the Defendants to establish that Care A2 Australia had reasonable grounds for this representation, and therefore it is taken not to have had such grounds, and the representation is taken to be misleading: ACL, s 4(1)-(2), and ASIC Act, s 12BB(1)-(2). Further, and in any event, the fact that no draft prospectus was prepared with respect to any proposed IPO or listing of Care A2 Australia on the ASX establishes that Care A2 Australia did not have reasonable grounds for this representation.
Iverson pleaded that Ms Hyland was “involved in” the conduct of Care A2 Australia that was misleading or deceptive, or likely to mislead or deceive (Commercial List Statement, paragraph [23]).
In order to establish that a person was “involved in” misleading or deceptive conduct which consists of the making of false representations, it is necessary to establish that the person had actual knowledge that the representations were made and had actual knowledge of the falsity of those representations: Yorke v Lucas (1985) 158 CLR 661 at 667-668; [1985] HCA 65 (per Mason ACJ, Wilson, Deane and Dawson JJ); Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88 at [327]-[343].
Iverson does not plead that Ms Hyland had knowledge of any of the representations made by Mr Cotton to Mr Sun, let alone knowledge of their falsity. The highest the pleading is put is that Ms Hyland “adopted or acquiesced” in the making of such representations (Commercial List Statement, paragraph [10]). However, it is difficult to see how Ms Hyland could “adopt” or “acquiesce in” representations unless she was aware that those representations had been made – and there is no pleading, let alone any evidence, to this effect.
When these matters were raised with Counsel for Iverson in closing address, he confirmed that the case against Ms Hyland “depends upon there being [a] representation by … her [in the 18 July Offer Letter] that Care A2 would lodge a prospectus within a reasonable time, and there being no basis for that representation”, rather than upon the misleading representations made by Mr Cotton on behalf of Care A2 Australia.
Having regard to those matters, I reject – insofar as it was pressed – the claim that Ms Hyland was involved in the misleading or deceptive conduct of Care A2 Australia that was constituted by the making of the IPO Representations, the Prospectus Representation or the Refund Representation.
I turn next to consider the case against Care A2 Australia and Ms Hyland based upon the 18 July Offer Letter.
Iverson pleaded that, by the 18 July Offer Letter, Care A2 Australia made the following representations to Iverson (described as the “Offer Representations”) (Commercial List Statement, paragraphs [8]-[9]):
Iverson’s subscription of $1m “would be refunded” by Care A2 Australia, if it “was not listed on the ASX within 90 days of its prospectus being lodged”;
Care A2 Australia “would lodge a prospectus with [ASIC] in respect of the proposed IPO within a reasonable time”; and
Care A2 Australia “was the Proposed Listing Company”.
Iverson further pleaded that Ms Hyland herself made the Offer Representations by “sending the [18 July Offer Letter] as agent for an on behalf of” Care A2 Australia (Commercial List Statement, paragraphs [9]-[10]).
Iverson claimed that the Offer Representations were misleading or deceptive, or likely to mislead or deceive, by reason of the following matters (Commercial List Statement, paragraph [21]):
“no lodgement of a Prospectus with ASIC was contemplated nor possible within 90 days of 18 July 2023 or any reasonable time thereafter”; and
“no application for listing of Care A2 [Australia] on the ASX was contemplated nor possible within 90 days of 18 July 2023 or any reasonable time thereafter”.
Iverson further claimed that each of the Offer Representations was a representation as to future matters within the meaning of s 4 of the ACL and s 12BB of the ASIC Act, and that, at the time Care A2 Australia and Ms Hyland made the Offer Representations, they did not have reasonable grounds for making those representations as to future matters (Commercial List Statement, paragraphs [15]-[16]).
In response, Care A2 Australia and Ms Hyland pleaded that:
the 18 July Offer Letter constituted “the entire and sole offer” made by Care A2 Australia to Iverson;
Iverson was not entitled to “rely on the alleged informal representations of [Mr Cotton], particularly where those alleged representations were inconsistent with, or not contained in, the subsequent formal Offer Letter”; and
Ms Hyland’s “only involvement was to formalise and communicate the company’s approved offer to [Iverson] by signing the Offer Letter in the proper discharge of her directorial duties”, and she “did not make, adopt, authorise or have any knowledge of the specific unauthorised representations allegedly made by Mr Cotton regarding a listing by August 2023”.
The essence of Iverson’s claim is that the 18 July Offer Letter was misleading because no lodgement of a prospectus with ASIC, and no application for listing of Care A2 Australia on the ASX, was either contemplated or possible “within 90 days of 18 July 2023 or any reasonable time thereafter” (see paragraph [117] above).
I have determined that:
Mr Cotton made representations, in his dealings with Mr Sun, that a listing application would be submitted on 18 July 2023, that a draft prospectus had been prepared for the purposes of this application, that listing on the ASX was expected to occur by 22 August 2023, and that the sum of $1m would be refunded to Iverson if such listing did not occur within 90 days of the application being made;
those representations were made by Mr Cotton on behalf of Care A2 Australia and within the scope of his apparent authority as an agent of Care A2 Australia, and therefore constituted conduct of Care A2 Australia; and
those representations were misleading or deceptive, by reason that no such draft prospectus had been prepared in relation to a proposed listing of Care A2 Australia on the ASX and there was no reasonable basis for those representations regarding the expected timing of any such application and listing.
I am satisfied that the 18 July Offer Letter formed part of a course of conduct by Care A2 Australia which was misleading or deceptive, or likely to mislead or deceive. In particular, in sending the 18 July Offer Letter, Care A2 Australia conveyed that it was contemplated that an application would be made to list Care A2 Australia on the ASX (which was consistent with the statements that Mr Cotton had made to Iverson on behalf of Care A2 Australia), set out terms for a pre-IPO subscription for shares by Iverson (which were consistent with those offered by Mr Cotton on behalf of Care A2 Australia), and did not qualify or correct any of the representations made by Mr Cotton on behalf of Care A2 Australia regarding the timeframe within which the application was expected to be made and the listing was expected to occur.
However, I am not satisfied that the 18 July Offer Letter conveyed any representation that Care A2 Australia would lodge a prospectus with ASIC in respect of the Proposed IPO “within a reasonable time”.
The letter itself is silent on the timing of any such application. Iverson submitted that in circumstances where Care A2 Australia, in the 18 July Offer Letter, referred to a contemplated application to list Care A2 Australia on the ASX, and made a promise that Iverson’s subscription moneys would be refunded if such listing did not occur within 90 days of the application being made, Care A2 Australia impliedly represented that such an application would be made “within a reasonable time”.
The difficulty with the implication of any such representation is that it would be directly inconsistent with the express representations made by Care A2 Australia (through Mr Cotton) immediately prior to the letter being sent. By those express representations, Care A2 Australia had conveyed to Iverson that a listing application would be made on 18 July 2023, with listing expected to occur on 22 August 2023. Having regard to that context, a reasonable person in Iverson’s position would not have understood the 18 July Offer Letter to convey that a listing application would be made at some (unspecified) “reasonable time” in the future. Instead, such a person would have understood that the letter did not qualify in any way the previous express representations that a listing application would be made on the day that the 18 July Offer Letter was sent.
For those reasons, I reject Iverson’s contention that Care A2 Australia represented that a listing application would be made at some “reasonable time” in the future. Instead, I am satisfied that Care A2 Australia engaged in misleading or deceptive conduct by representing to Iverson that an application to list Care A2 Australia on the ASX would be submitted on 18 July 2023, with listing expected to occur some five weeks thereafter, when there was no reasonable basis for any such representation and, in particular, where no draft prospectus had been prepared for any such proposed listing of Care A2 Australia on the ASX.
The issuing of shares in Care A2 Australia constituted the issuing of “a financial product” (ASIC Act, s 12BAA(7)(a)), which in turn constituted “dealing” in a financial product (ASIC Act, s 12BAB(7)), and therefore the provision of a “financial service” (ASIC Act, s 12BAB(1)).
It follows that Care A2 Australia, in its dealings with Iverson in relation to the offer to subscribe for 2m ordinary shares in Care A2 Australia, engaged in conduct “in relation to financial services” that was misleading or deceptive, or was likely to mislead or deceive, and thereby contravened s 12DA of the ASIC Act. Alternatively, if I am wrong in concluding that the relevant conduct was “in relation to financial services”, Care A2 Australia contravened s 18 of the ACL by engaging in such conduct.
As noted above, Iverson pleaded that Ms Hyland sent the 18 July Offer Letter “as agent for and on behalf of” Care A2 Australia.
The circumstances in which an officer of a company may be personally liable for conduct engaged in as agent for and on behalf of the company were summarised by Ball J (as his Honour then was) in DSHE Holdings (Receivers & Managers Appointed)(In Liquidation) v Nicholas Abboud (No 3); National Australia Bank Limited v Nicholas Abboud (No 4) [2021] NSWSC 673 at [523]-[527], as follows:
“If an individual engages in conduct that is misleading and deceptive as a principal or agent of a company, liability may attach to both. As the High Court explained in Houghton v Arms (2006) 225 CLR 553, [2006] HCA 59 at [40]:
…As a general proposition, and as Lord Rodger of Earlsferry stressed in Standard Chartered Bank v Pakistan Shipping Corpn (Nos 2 and 4), in the world of tort the status of an individual as an employee does not divest that person of personal liability for wrongful acts committed while an employee. There is no good reason for treating the text of [s 18 of the ACL] any differently and, in particular, for construing the section as if it read ‘[a] person, as principal, must not …’ [Footnote omitted]
Similarly, in Williams v Pisano (2015) 90 NSWLR 342**,** [2015] NSWCA 177 at [42] the NSW Court of Appeal (per Emmett JA, Bathurst CJ and McColl JA agreeing) said:
An employee, who engages in misleading and deceptive conduct in the course of his employment by his employer, engages in that conduct in trade or commerce if the activity of the employer in the pursuit of which the conduct is engaged in is itself in trade or commerce. That is to say, it is not the trade or commerce of the employee but the trade or commerce of the employer in which the conduct takes place. It is not to the point that the employee is not a proprietor of the business or that the employee’s activities were an aspect or element not of his own trade or commerce but of the trade or commerce of his employer. The employee nevertheless engages in conduct in the course of trade or commerce and their conduct constitutes a contravention of s 18 by the employee personally. [Footnote omitted]
The question in each case is whether ‘all of the elements of the contravention are made out against the individual or whether he or she merely acted as a corporate organ, binding the company but not the person individually’: Australian Securities and Investments Commission v Narain (2008) 169 FCR 211, [2008] FCAFC 120 per Jacobson and Gordon JJ at [96], citing Cleary v Australian Co-Operative Foods Ltd (Nos 2 & 3) (1999) 32 ACSR 701; [1999] NSWSC 991 at [54], [56] and [57]; Pico Holdings Inc v Voss [2004] VSC 263 at [157]; Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [297]-[305]. That is a question of fact in each case: Narain at [97] citing Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) (2007) 63 ACSR 1, [2007] NSWSC 124 at [1056]-[1057].
Narain provides an example of the application of these principles*.* Mr Narain was the director of a company called Citrofresh International Ltd (CTF). He (with the assistance of others) prepared an Australian Stock Exchange (ASX) release in which it was claimed that CTF’s products were effective against HIV/AIDS and other major diseases. He then instructed the company secretary to send the statement to the ASX for publication. The Full Court of the Federal Court, overturning the primary judge’s decision, found that Mr Narain (as a person with the authority to order the statement’s release and knowledge of the representations contained in it) had personally engaged in misleading and deceptive conduct (at [19] and [98]). On the other hand, the company secretary had no personal liability. He was merely the person who forwarded the statement to ASIC at Mr Narain’s direction. His actions were ministerial in nature and undertaken solely as an organ of the company (again at [19] and [98]).
Personal liability may be more difficult to establish where the relevant conduct consists of silence. As Hammerschlag J explained in Swiss Re International SE v Simpson (2018) 354 ALR 607; [2018] NSWSC 233 at [529]:
It is one thing to attribute to [Bell] personally the consequences of what he said, because those flow from action which he took. It is another to take a non-disclosure by Forge as Bell’s own because he was one, amongst many other potential human embodiments of Forge, who did not disclose it. The non-disclosure was always Forge’s. It does not become Bell’s non-disclosure because he was not the one on Forge’s behalf to disclose it.”
I am not satisfied that Ms Hyland personally engaged in misleading conduct by sending the 18 July Offer Letter, for three main reasons.
First, the evidence indicates that the relevant conduct of Ms Hyland was essentially ministerial in nature and was undertaken by her solely as an organ of Care A2 Australia. The 18 July Offer Letter repeated, in the form of a letter from Care A2 Australia’s director, terms which had already been offered by Care A2 Australia several days earlier, through WhatsApp messages sent by Mr Cotton on 15 July 2023 (see paragraph [48] above). Those terms were offered to Iverson following discussions between Mr Cotton and the “founder” of Care A2 Australia (namely, Mr Galati), in which Ms Hyland does not appear to have been involved. Mr Cotton then, by way of an email sent to Ms Hyland and Mr Galati, referred to his previous discussions with Mr Galati about the offer to Iverson, informed Ms Hyland what the terms of that offer were, and requested Ms Hyland to prepare a letter which set out those terms (see paragraph [51] above). Ms Hyland then did so. The terms set out in the 18 July Offer Letter that was signed by Ms Hyland matched, almost word-for-word, the terms specified by Mr Cotton on the previous day, following his discussions with Mr Galati and Mr Sun.
Secondly, I have determined that Care A2 Australia engaged in misleading or deceptive conduct, including by reason that the 18 July Offer Letter did not qualify or correct the representations previously made by Care A2 Australia (through Mr Cotton) that an application to list on the ASX would be made on 18 July 2023, with listing expected to occur on 22 August 2023. However, there is no basis to conclude that Ms Hyland herself engaged in misleading or deceptive conduct in signing and sending that letter, since there is no pleading and no evidence that she knew that those previous representations had been made. She plainly cannot be liable for having failed to correct representations of which she was not aware.
Thirdly, it follows that, as Counsel for Iverson acknowledged in oral address (see paragraph [112] above), the claim for misleading conduct against Ms Hyland essentially depended on the proposition that, by sending the 18 July Offer Letter, she represented that an application to list Care A2 Australia on the ASX would be made “within a reasonable time”. However, I have determined that the letter did not convey, and would not have been understood by a reasonable person in Iverson’s position to convey, any such representation.
It follows that Iverson’s claim against Ms Hyland must be dismissed.
Iverson pleaded that in reliance on the IPO Representations, the Refund Representation, the Prospectus Representation and the Offer Representations, Iverson agreed with Care A2 Australia to subscribe for 2,000,000 fully paid ordinary shares in Care A2 Australia at $0.50 per share and, pursuant to this agreement, paid $1m to Care A2 Australia (Commercial List Statement, paragraphs [11] and [13]).
In response, Care A2 Australia and Ms Hyland pleaded that:
the “informal ‘WhatsApp’ communications” between Mr Cotton and Mr Sun, which occurred prior to the 18 July Offer Letter, were superseded by that letter, which “constituted the entire and sole offer made by [Care A2 Australia] to [Iverson]”;
Iverson, which was “a self-described sophisticated investment vehicle for a high-net-worth family”, reviewed and formally accepted the terms of the 18 July Offer Letter; and
it was not reasonable for Iverson to rely on any alleged informal representations by Mr Cotton which were inconsistent with, or not contained in, the 18 July Offer Letter.
I reject the Defendants’ contentions. As outlined above, I have determined that the representations made by Mr Cotton constituted conduct of Care A2 Australia, and that the 18 July Offer Letter did not qualify, or correct, those representations. It follows that a reasonable person in the position of Iverson would have read the 18 July Offer Letter in the context of the previous representations that had been made on behalf of Care A2 Australia, and would have understood that Care A2 Australia was conveying that an application to list on the ASX would be made on the day that the 18 July Offer Letter was sent, and that Iverson’s subscription moneys would be refunded in full if listing did not occur within 90 days of that application being made (that is, by 16 October 2023).
I am satisfied that Iverson decided to invest in Care A2 Australia, and paid $1m to Care A2 Australia, in reliance on those representations.
This conclusion is supported by Mr Sun’s unchallenged evidence to this effect (see paragraph [66] above), and also by the contemporaneous objective evidence. In particular, prior to deciding to cause Iverson to invest in Care A2 Australia, Mr Sun expressly sought – and obtained – confirmation as to the proposed timing for the making of a listing application, and the consequences if the application was not successful (see paragraphs [40]-[42] and [47]-[48] above). It was plainly critical to Iverson’s decision to invest $1m in Care A2 Australia that it had received confirmation that a listing application was imminent, and that its moneys would be refunded in full if Care A2 Australia was not listed on the ASX within 90 days of that investment being made.
Having regard to those matters, I am satisfied that Iverson has suffered loss and damage as a result of Care A2 Australia’s misleading or deceptive conduct, in that it was induced to pay $1m for shares in Care A2 Australia which it would have had no interest in acquiring if it had been informed of the true position.
Iverson pleaded as follows (Commercial List Statement, paragraphs [11], [12] and [24]):
in reliance on the IPO Representations, the Refund Representation, the Prospectus Representation and the Offer Representations, Iverson accepted Care A2 Australia’s offer, in the 18 July Offer Letter, to subscribe $1m for 2m ordinary shares in Care A2 Australia (the 18 July Subscription Agreement);
it was a term of the 18 July Subscription Agreement that:
(a) Care A2 Australia “would lodge a prospectus with ASIC in respect of the proposed IPO within a reasonable time”; and (b) Iverson’s subscription moneys “would be refunded” by Care A2 Australia if it “was not listed on the ASX within 90 days of its prospectus being lodged”; and
(a) Care A2 Australia “has not lodged… a prospectus with ASIC in respect of the proposed IPO within a reasonable time or at all”; and (b) Iverson’s subscription moneys of $1m have not been refunded, “notwithstanding that Care A2 [Australia] has not [been] listed on the ASX within 90 days of its prospectus being lodged, or at all”.
I am not satisfied that this claim has been established. The 18 July Offer Letter did not contain any express term to the effect that Care A2 Australia “would lodge a prospectus with ASIC in respect of the proposed IPO within a reasonable time”. Nor am I satisfied that such a term would be implied into the 18 July Subscription Agreement in the circumstances of this case, as it would have been inconsistent with express pre-contractual representations made by Care A2 Australia that a listing application was to be made on 18 July 2023 (that is, on the day that the 18 July Subscription Agreement was entered). As set out at paragraphs [40]-[41] above, Mr Cotton had informed Mr Sun, on 13 July 2023, that it was essential that Iverson entered into an agreement to subscribe for shares in Care A2 Australia by 18 July 2023 precisely because Care A2 Australia would be submitting a listing application on that date.
Accordingly, the claim based on breach of the 18 July Subscription Agreement is not established. Instead, as I have explained above, I am satisfied that, but for Care A2 Australia’s misleading or deceptive conduct, Iverson would not have agreed to subscribe for 2m shares in Care A2 Australia either on the terms of the 18 July Subscription Agreement or at all.
Iverson claimed that it is entitled to a refund of $1,000,000 from Care A2 Australia. Iverson pleaded that, unless it is refunded this amount in full, it will have suffered loss and damage, being the difference between this amount and the value of the subscription shares, which is unknown to Iverson.
Mr Sun deposed that Iverson is ready, willing and able to consent to the cancellation of the issued shares in return for payment to it of the sum of $1,000,000 plus interest thereon.
Section 12GM of the ASIC Act provides, relevantly, that if, in a proceeding instituted under Div 2 of the ASIC Act, the Court finds that a party has suffered, or is likely to suffer, loss or damage by conduct of another person which contravened a provision of that Division (including s 12DA), the Court may make such order as it thinks appropriate against the person who engaged in such conduct, if the Court considers that the order will compensate the injured party in whole or in part for the loss or damage, or will prevent or reduce the loss or damage. Subsection 12GM(7) provides that, without limiting the generality of this power, the orders may include an order directing the contravening party to refund money or return property to the injured party.
The ACL contains similar remedial provisions in respect of any contravention of s 18 (see ss 237, 243).
In their Commercial List Response, Care A2 Australia and Ms Hyland pleaded that it was “premature” to award relief, in circumstances where “legitimate and complex commercial factors” have delayed “the proposed ASX listing”.
This pleading was not supported by any evidence from the Defendants and, in any case, does not identify an adequate basis for declining the relief sought by Iverson.
Iverson agreed to subscribe for shares on 18 July 2023 in circumstances where Care A2 Australia had represented that a listing application would be submitted on the same day, and that Iverson would get its money back if the application was not successful within 90 days. I have determined that those representations were misleading or deceptive, and that, but for this misleading conduct, Iverson would not have agreed to subscribe for 2m shares in Care A2 Australia and would not have paid $1m to Care A2 Australia for those subscription shares. It is, therefore, of little consequence whether there is an explanation (involving unspecified “legitimate and complex commercial factors”) as to why no such listing application has been made in the period of more than two-and-a-half years since those misleading representations were made.
Iverson had no desire to invest in a company that may, at some unspecified time in the future, make an application to list on the ASX, dependent upon how various “complex commercial factors” might play out in the future. It wanted to invest, and understood (by reason of Care A2 Australia’s misleading or deceptive conduct) that it was investing, in a company that was making such an application at the precise time that Iverson agreed to invest.
In particular, Iverson understood, on the basis of Care A2 Australia’s misleading representations, that it was agreeing to subscribe for 2m shares in Care A2 Australia, at a price of $0.50 per share, in circumstances where an application was being submitted at the same time for Care A2 Australia to be listed on the ASX, with an initial public offering at a “firm” price of $0.75 per share, and with listing expected to occur by 22 August 2023. Further, Iverson decided to invest, in circumstances where it had the benefit of promises that if the listing did not occur within 90 days of the application, it would receive a full refund of $0.50 per share and, if listing did occur as expected, it would have the option of a minimum buy-back from Care A2 Australia at a price of $0.75 per share within twelve months of the company being listed. Accordingly, Iverson understood, on the basis of Care A2 Australia’s misleading or deceptive conduct, that it was investing $1m in securities that would be liquid, with options of selling on the market or (if the market price fell) selling back to the company, and with a promise of a full refund if listing did not occur by around 16 October 2023.
Instead, Iverson received, in return for its $1m investment, illiquid shares in a company that has not applied for listing on the ASX, and Iverson has been unable to exit this investment, despite seeking to do so since the latter part of 2023.
Notwithstanding the lack of evidence regarding the current value of the shares in Care A2 Australia (which would depend on matters within the knowledge of Care A2 Australia), I am satisfied that, in the circumstances outlined above, Iverson has received something different from, and less valuable than, what it understood, based on Care A2 Australia’s misleading representations, it would be receiving in return for its $1m investment, and therefore has suffered loss or damage by reason of Care A2 Australia’s misleading conduct. I am also satisfied that an order for repayment of its subscription moneys, plus interest, would compensate Iverson for that damage, or would prevent that damage. As noted above, Mr Sun confirmed that Iverson is ready, willing and able to consent to the cancellation of its issued shares in return for payment to it of this sum.
In those circumstances, I am satisfied that the appropriate relief is that Care A2 Australia be ordered to refund the sum of $1,000,000 to Iverson, together with pre-judgment interest at Court rates from 20 July 2023 (being the date when this sum was transferred to the Care A2 Account).
As Iverson has established its claim against Care A2 Australia, I will also make an order that Care A2 Australia pay Iverson’s costs, as agreed or assessed.
Ms Hyland did not appear at the hearing to seek any order for costs in the event that she was successful in defending Iverson’s claims. Further, given the limited extent of the claims against Ms Hyland, and the fact that those claims arose from the same factual allegations as the claims against Care A2 Australia, it is likely that such costs (if any) as were solely referrable to the claims against Ms Hyland were limited in extent. In those circumstances, I will provisionally make an order that there be no order as to costs as between Iverson and Ms Hyland. This provisional order will take effect seven days after the date of this judgment unless Ms Hyland notifies Iverson and my Associate in writing that some other order is sought, specifies the order and provides a brief statement of the grounds for it, in which event the order will not take effect and I will make directions to deal with costs, with the intent that any such issue will be dealt with on the papers.
For those reasons, I make the following orders.
Order that the First Defendant pay to the Plaintiff, within 28 days of the date of this order, the sum of $1,000,000, together with pre-judgment interest on that sum in the amount of $223,167.
Note that the Plaintiff consents, on the receipt of the amounts referred to in order (1) above, to the cancellation of its 2,000,000 shares in the First Defendant.
Dismiss the Summons as against the Second Defendant.
Order that the First Defendant pay the Plaintiff’s costs, as agreed or assessed.
Provisionally order that there be no order as to costs as between the Plaintiff and the Second Defendant. This order will take effect seven days after the date of this judgment unless the Second Defendant notifies the Plaintiff and the Associate to Nixon J in writing that some other order is sought, specifies the order and provides a brief statement of the grounds for it, in which event the order will not take effect and directions will be made to deal with costs as between the Plaintiff and the Second Defendant.
**********
Iverson Partners Inc
Care A2 Australia Pty Ltd [2026] NSWSC 362
(1912) 15 CLR 679
(2018) 354 ALR 607
(2023) 297 FCR 180
(1985) 158 CLR 661
(2023) 111 NSWLR 304
(2024) 281 CLR 338
(2006) 225 CLR 553
(2015) 90 NSWLR 342
(2008) 169 FCR 211