Plaintiff v Defendant

2 On 18 August 2025 Waller J ordered that New Stem's application for an interlocutory injunction be fixed before the Commercial Court Duty Judge on 29 August 2025 and made associated timetabling orders.

3 Consequent upon the undertakings provided by New Stem, including the usual undertaking as to damages, Waller J made interim consent orders restraining Magellan from taking any steps to appoint a receiver or otherwise enforce its rights under the General Security Deed until 4:00pm on 29 August 2025.

4 Magellan consented to the interim injunction sought in the summons until 4:00pm on 29 August 2025 without prejudice to its opposition to the grant of interlocutory injunctive relief. As a further interim measure, New Stem provided an undertaking to the Court that it would not disperse the funds currently held in its solicitor's (Juris Cor Legal) trust account, being the sum of $389,940, until 4:00pm on 29 August 2025.

5 At the hearing on 29 August 2025, New Stem sought the extension of the interim injunction granted on 18 August 2025 until the hearing and determination of the proceeding, or further order.

6 At the conclusion of argument and upon an undertaking by Magellan to limit the scope of the appointment of any receivers,[1] I delivered my ruling orally and declined to grant the interlocutory injunction.

8 The application for interlocutory injunctive relief was made pursuant to r 38.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

9 The legal principles applicable to the discretion to grant an interlocutory injunction are well established and are not in dispute.

10 The applicable principles were articulated by the High Court in Australian Broadcasting Corporation v O'Neill.[2] The test was recently summarised by O'Bryan J in Squirrel Limited v Cadmon Advisory Pty Ltd[3] as follows:

The test for an interlocutory injunction was stated by the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 per Gleeson CJ and Crennan J at [19] and Gummow and Hayne JJ at [65]-[72]. There are two principal questions. The first is whether the plaintiff has made out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that at the trial of the action the plaintiff will be entitled to relief. The second is whether the inconvenience or injury which the plaintiff would be likely to suffer were an injunction refused outweighs or is outweighed by the injury which the defendant would suffer were an injunction granted. The Court explained that the phrase "prima facie case" does not mean that the plaintiff must show that it is more probable than not that at trial it would succeed. It is enough that the plaintiff shows a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. The requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.

11 The applicable principles are not separate and independent of each other but must be examined together.[4] Thus, a doubtful claim which satisfies the 'prima facie case' or 'serious question to be tried' threshold may still attract interlocutory relief if there is a significant balance of convenience in favour of it.[5]

12 As the Court of Appeal has observed,[6] ultimately the court should take the course that appears to carry the lower risk of injustice if it should turn out to be wrong, in the sense of granting an injunction to a party who fails to establish the asserted right at trial or failing to grant an injunction to a party who succeeds at trial.

13 New Stem principally relies on the affidavit of Jia Li (Ms Jia), the sole director and secretary of New Stem, affirmed 14 August 2025. The plaintiff also relied on the affidavit of Yi Tan, affirmed 22 August 2025. Yi Tan is a scientist working for New Stem and responsible for running New Stem's lab and supervising the work carried out by New Stem's research and scientific team.

14 Magellan relied upon the affidavit Peter Hansen (Mr Hansen), a director of Magellan, affirmed 27 August 2025.

15 New Stem is a cellular biotherapy company offering autologous stem cell therapy and autologous NK (natural killer) immune cell therapy to its customers.

16 In or around 2019, New Stem entered into a collaboration agreement (Agreement) with Magellan, pursuant to which New Stem engaged Magellan to supply cell culturing and associated services to New Stem. Between approximately September 2019 and 8 April 2024, Magellan operated the laboratory at the New Stem Clinic (the Laboratory).

17 On 12 January 2024 Ms Jia, on behalf of New Stem, sent an email to Mr Hansen. Pursuant to that email, New Stem terminated the Agreement. At that time, New Stem owed $529,940 to Magellan under the Agreement, although $118,000 of that sum was applicable to approximately '5,400 million cells' which were yet to be manufactured by Magellan.

18 Ms Jia deposes to a conversation with Mr Hansen on 10 January 2024 immediately prior to the termination of the Agreement. Ms Jia's evidence records that conversation as including words to the following effect (emphasis added):

Ms Jia: I am sorry, but I need to end the Agreement with Magellan. Like I told you before, most of my clients are in China, and the economy there hasn't really bounced back from the pandemic. My clients don't have enough money to keep up their treatment, and it's been tough for them to get visas to come to Australia. On top of that, my family's going through some serious financial issues. Because of all this, I'm thinking about handing over New Stem's lab to another company that has its own scientific team.

Mr Hansen: We have worked together for several years. You know the stem cells we cultured are of good quality. Our culture method is unique. No other team could possibly culture stem cells of the same quality.

Ms Jia: Yes, I know. But I don't have a choice. The company I just told you about is working with a professor at the University of Technology Sydney, so I'm confident my customers would be well taken care of.

19 Ms Jia deposes to a subsequent conversation with Mr Hansen on 13 March 2024 which included words to the following effect (emphasis added):

Ms Jia: I just don't have the financial resources to keep running the lab anymore. I also need to focus on helping my family. The company I mentioned before is interested in taking over New Stem's lab. They introduced me to their team of scientists, and they're all very capable and experienced.

Mr Hansen: You really need to think it through. The quality of our stem cells is excellent. I am sure in this whole world, only Magellan knows how to culture stem cells.

Ms Jia: I've made up my mind. Please hand over the lab to me, and I will take it from there. Also, I need you to provide me with a list of the stem cells you've cultured for the customers, the inventory of the equipment and machinery, the operating procedures and the consumables used in the lab. Please also give me the stem cell environmental test reports and the stem cell marker reports as soon as possible. As you know, these reports are very important for my customers' treatment.

Mr Hansen: I am sorry to hear that. We will hand over the lab. I will give you the documents on 8 April.

20 On or around 8 April 2024 to settle the amount owing under the Agreement, New Stem entered into a deed of settlement (Settlement Deed) and the General Security Deed.

21 The Settlement Deed relevantly contains the following operative terms:

(a) an acknowledgement by New Stem and Magellan that:

(i) New Stem owes $529,940 (Amount Owing);

(ii) A discount of $118,800 (Discount Amount) is being applied to the Amount Owing as, amongst other things, there are approximately '5,400 million' cells remaining to be manufactured by Magellan;

(iii) New Stem (as the grantor) and Magellan (as the secured party) will enter into a general security deed on or around the date of the Settlement Deed; and

(iv) Magellan would only be able to enforce the general security deed for a breach of any payment obligation under the Settlement Deed.

(b) New Stem agreed to pay the sum of $411,140 (Settlement Amount) to Magellan as follows:

(i) $140,000 by the earlier of 8 April 2024, or the date of the handover of a specified laboratory;

(ii) $135,570 by 30 June 2024;

(iii) the balance, being $135,570, by 30 September 2024; and

(c) New Stem acknowledged and agreed that if it failed to make any of the above payments when they became due and payable, that the Settlement Amount and Discount Amount would become due and payable to Magellan.

22 Clause 12 of the Settlement Deed also contained an acknowledgment and agreement by both New Stem and Magellan which stated that in entering into the Settlement Deed, each party 'has not relied on any representations or warranties about its subject matter except as expressly set out in this Deed'.

23 Ms Jia deposes to the fact that the reports the subject of her conversation with Mr Hansen on 13 March 2024 - being stem cell environmental test reports and stem cell micro test reports - were important as New Stem would be unable to use the cells for treatment unless they met criteria which would be identified in those reports.

24 Ms Jia deposes that on or around 18 October 2024, because Magellan had not provided any stem cell marker reports following entry into the Settlement Deed, New Stem engaged a third party company to test stem cells cultivated by Magellan. Relying on the evidence of Yi Tan, New Stem contends that the cells are not suitable for human treatment, including the treatment offered by New Stem. Based on Yi Tan's evidence, New Stem identifies that for a cell to be classified as a stem cell, certain identified 'CD markers' must be no less than 95%. Following review of the reports commissioned from the third party, Yi Tan observed that the CD markers of the cells tested did not all exceed 95%.

25 Through Mr Hansen, Magellan has adduced hearsay evidence that the reports provided by New Stem to Magellan concern stem cells for six patients and demonstrate that the stem cells tested were of low quality. Ms Jia gave evidence that she knew that 'because cells cultured by Magellan were unsuitable for treatment, the treatment of around sixty clients was delayed'.

26 The evidence referred to in paragraphs [23] to [25] above needs to be understood in the broader context of the contractual relationship between New Stem and Magellan.

27 Since 2019, pursuant to the Agreement, Magellan would isolate, culture and store stem cells at the Laboratory for use by New Stem. The steps involved in the isolation, cultivation and storage of stem cells at the Laboratory were as follows:

(a) doctors engaged by New Stem would perform a liposuction procedure on the patient to extract adipose (fat) tissue from the patient's body;

(b) the adipose tissue would be transferred to the Laboratory, where Magellan would isolate stem cells from the adipose tissue;

(c) once the stem cells were isolated, Magellan would culture the stem cells in a controlled environment, which allowed them to grow and multiply. The cultivation process involved growing the stem cells in an incubator, which had to be maintained using specific gases and a specific temperature;

(d) at a certain stage in the cultivation process, third parties would conduct a sterility and flow cytometry test on a sample of the cultivated stem cells;

(e) a sterility test was undertaken to ensure that the stem cells were free from microbial contamination;

(f) a flow cytometry test was undertaken to ensure that the stem cells met defined characterisation specifications before clinical use, based on the analysis of certain cell surface markers. A flow cytometry test was generally undertaken after approximately 4-6 weeks of cultivation;

(g) following cultivation, the stem cells were either used immediately for treatment or stored in cryogenic freezers for future use. In the majority of cases the stem cells were stored;

(h) prior to New Stem undertaking treatments, staff at the Sydney Day Hospital would review the relevant sterility and flow cytometry reports applicable to the stem cells, to check that the stem cells were suitable for clinical use; and

(i) assuming the stem cells were suitable, the patient would attend the Sydney Day Hospital for a stem cell treatment undertaken by doctors engaged by New Stem.

(a) between September 2019 and 8 April 2024, being the period that Magellan operated the Laboratory and cultivated stem cells for New Stem, Magellan did not provide New Stem with any stem cells unless the stem cells had been shown to be sterile and had been assessed by Magellan as suitable for clinical use by reference to flow cytometry analysis; and

(b) over the four and a half years that Magellan was providing cultivated stem cells to New Stem, it did not receive any complaint from New Stem (or any doctor engaged by New Stem) regarding the quality of the stem cells isolated and cultivated by Magellan at the Laboratory.

29 This evidence was not the subject of disagreement or challenge by New Stem. Reduced to its essence, the evidence suggests that Magellan had produced verified and tested stem cells to New Stem for clinical use for approximately four and half years without complaint by New Stem.

30 Magellan's evidence also suggests that cell surface markers may change over time if the stem cells are not stored correctly or are improperly cultivated. This raises the prospect, albeit insignificant to the ultimate disposition of the application, that the stem cells became unsuitable following the handover of the Laboratory by Magellan and in the 6 months between the Settlement Deed and testing of the cells on behalf of New Stem.

31 In accordance with the terms of the Settlement Deed, the General Security Deed was executed on or about 8 April 2024. On 8 April 2024, New Stem also made the first payment of $140,000 to Magellan as required by the terms of the Settlement Deed.

32 It is common ground that New Stem has not paid either of the subsequent tranches required by the terms of the Settlement Deed. It is also common ground that New Stem's failure to make those payments constitute a relevant 'Default' under the General Security Deed which presently entitles Magellan to appoint a Receiver[7] over all of New Stem's present and future property of any kind, including all laboratory equipment and stem cells.

33 On or around 7 August 2025, Ms Jia caused New Stem to transfer $389,940 into Juris Cor's trust account which New Stem submitted was currently available to be paid into court.

34 On 11 August 2025, Magellan sent a notice of default to New Stem under the General Security Deed, and advised that unless payment of the sum of $389,940 was received by 13 August 2025, Magellan intended to appoint Receivers.[8]

35 On 15 August 2025, New Stem commenced this proceeding.

36 Mr Hansen gave evidence that as at 27 August 2025, New Stem was indebted to Magellan in the sum of not less than $478,375.51, comprising:

(a) the principal owing of $389,940;

(b) interest owing under the Settlement Deed as at 27 August 2025 of $50,172.41;

(c) enforcement costs of $38,263.10 payable under clause 10.2 of the General Security Deed.

37 In aid of its application for injunctive relief, New Stem undertook at the hearing to pay the sum of $478,375.51 into Court, pending the hearing and determination of the proceeding.

38 As to the consequences of the appointment of Receivers, Ms Jia deposed as follows:

If a receiver is appointed, New Stem's lab and scientific team may be forced to stop working on culturing stem cells. New Stem's equipment in the lab may also be sold. This would have an impact on New Stem's five employees, whose employment would be at risk.

I know, as the sole director of New Stem, that this will seriously affect New Stem's customers who rely on stem cells for their treatments, causing delays or stopping them from getting the care they need.

39 To meet this concern Magellan said it was willing to limit the appointment of Receivers to the funds held in New Stem's solicitors' trust account, plus other available cash balances and debtor receipts.

40 Magellan submitted that the limitation was intended to ensure that the receivership would not impede New Stem's ability to continue trading or provide patient treatments. Ultimately, in the course of argument, Magellan advanced the following form of undertaking, designed to further reduce the impact of any receivership:

The defendant undertakes to the Court, by its counsel, that any appointment of receivers by it under the general security deed between the defendant and the plaintiff dated 8 April 2024:

(a) will be limited to cash assets or cash-equivalent assets of the plaintiff, including but not limited to bank accounts, debtors/receivables, and monies held on behalf of New Stem in Juris Cor Legal's trust account; and

(b) will be limited to recovery of the sum of $478,375.51, with no additional amount on account of the receiver's costs and expenses, subject to further order of the Court.

41 New Stem has not filed a Statement of Claim. An evaluation of the strength of its case must therefore be made by reference to the Indorsement of Claim and supporting evidence of Ms Jia and Yi Tan.

42 New Stem's submissions as to the existence of a 'prima facie case' were focussed on claims of common law misrepresentation and statutory misleading or deceptive conduct reliant upon s 18 of the Competition and Consumer Act 2010 (Cth) (the ACL).[9] Each claim was alleged to give rise to a right on the part of New Stem to obtain an order rescinding the Settlement Deed and General Security Deed.

43 Counsel for New Stem identified that the relevant misrepresentations were made in the course of Mr Hansen's oral communications with Ms Jia, set out above, and in particular Mr Hansen's statements to the effect that:

(a) 'You know the stem cells we cultured are of good quality'; and

(b) 'The quality of our stem cells is excellent'.

44 Ms Jia's evidence as to the effect of the alleged misrepresentations was as follows:

In entering into the Settlement Deed and the [General] Security Deed, I, as the sole director of New Stem, believed that New Stem had complied with its contractual obligations to provide the requisite expertise necessary to 'manufacture cells' for use in treatments and in forming that belief, I relied on what I was told in paragraphs [12][10] and [15][11] above.

I would not have caused New Stem to enter the Settlement Deed and the [General] Security Deed if I had been told that the cells cultured by Magellan for around 60 customers could not be classified as stem cells such that they were completely unusable and valueless to New Stem, with the effect that New Stem had to incur the cost of re-culturing cells for the relevant clients.

45 Counsel for New Stem confirmed that the case of misrepresentation and statutory misleading or deceptive conduct was based on the identified express representations. No case of implied representations or misleading conduct by silence was identified or advanced. Moreover, the claims being advanced are claims of innocent rather than fraudulent misrepresentation. Counsel for New Stem further submitted that the relevant representations were being relied upon as representations of fact.

46 At this juncture, it is worth emphasising that in establishing a 'prima facie case', New Stem must demonstrate a sufficient likelihood of success to justify the preservation of the status quo pending trial. Whilst this does not require the probability of success on New Stem's part, I have determined that New Stem's claim, as articulated and developed in the evidence, does not demonstrate a sufficient likelihood of success to warrant the preservation of the status quo. That is for the following reasons.

47 First, New Stem's claims insofar as they are based on innocent misrepresentation, are likely to be barred by clause 12 of the Settlement Deed.[12] Counsel for New Stem appropriately conceded that such a claim would be 'difficult' absent evidence of sharp conduct or fraud.

48 Second, the contention that the representations expressly conveyed to New Stem that 'Magellan had complied with its contractual obligations to provide the requisite expertise necessary to "manufacture cells" for use in treatments' is weak. No case of implied representation was advanced and even if such a claim was to be promulgated, the suggestion that the representations 'conveyed something more'[13] to the effect that Magellan had complied with its contractual obligations is not sufficiently strong to warrant maintenance of the status quo.

49 Third, even if the alleged representations did convey a representation that Magellan had complied with its contractual obligations, the evidence as to the falsity of that representation is weak. The evidence discloses that Magellan appears to have performed its contractual obligations without complaint by New Stem for four and a half years. Moreover, the evidence presently reveals that the non-compliant cells have been cultivated from only six patients in a context where New Stem will have the onus of establishing that the viability of the cells has not been adversely affected by the storage of the cells following handover and the passage of time. I also note that in establishing the falsity of the alleged representations, New Stem will face even greater difficulty if the representations are characterised as statements of opinion at trial - which, having regard to their potential character as statements of Mr Hansen's belief, is a significant possibility. There is a paucity of evidence to suggest that the representations lack reasonable grounds and the evidence adduced to date as to the absence of complaint during the treatment of patients over the duration of the Agreement is suggestive of a different conclusion.

50 Fourth, on the existing evidence, New Stem may also face significant difficulty in establishing that the alleged misrepresentations led Ms Jia into error.[14] The evidence disclosed that Magellan had been performing its obligations under the Agreement for a substantial period of time, without complaint by New Stem. New Stem's case does not appear to involve a generalised assertion of a failure to perform. Rather, its case is more nuanced. In this regard, I note that Ms Jia's evidence is very specific - that New Stem would not have entered into the Settlement Deed and General Security Deed had she been 'told that cells cultured by Magellan for around 60 customers could not be classified as stem cells'. Such a case would likely require the Court to find that it was an existing and known fact as at 8 April 2024 that cells for around 60 customers could not be classified as stem cells and that Magellan's silence and failure to disclose that fact to New Stem in the course of negotiating the Settlement Deed and General Security Deed was misleading conduct. For present purposes, it is sufficient to note that: there may be considerable difficulties in establishing that these matters were known as at 8 April 2024; and, in any event, no claim for misleading conduct by silence is presently being advanced.

51 For the foregoing reasons, I have determined that New Stem has not met the requisite threshold of establishing a 'prima facie case'.

52 Although not strictly necessary to decide, I have also determined that the balance of convenience favours refusing the application.

53 The evidence reveals that New Stem's financial position is far from strong. New Stem is dependent upon Ms Jia's continued personal financial backing. In order to transfer funds to be held in its solicitor's trust account, New Stem was required to borrow funds from Ms Jia. New Stem also needed to negotiate a 'viable' payment plan for the repayment of amounts outstanding under the Agreement in tranches. Ms Jia's conversations with Mr Hansen also reveal that the poor financial position of New Stem was a significant factor which led New Stem to terminate the Agreement.

54 The financial position of New Stem is relevant because if the status quo was preserved, interest and enforcement costs would continue to escalate and Magellan would, if successful, then need to seek recovery of a much greater sum from New Stem. Whether or not that sum would be made available to New Stem, would then appear to be dependent on the discretion of Ms Jia. Whilst Ms Jia did instruct counsel that New Stem would be willing to 'pay more money into court', the quantum of the undertaking was not specified and counsel properly recognised that absent a quantified figure such an instruction was 'unhelpful'. It is not desirable that the Court be required to continually supervise whether the terms of the undertaking are sufficient to justify the maintenance of the status quo.

55 The form of the undertaking proffered by Magellan, through counsel, limits the effect of the appointment of receivers and by reason of that limitation is very unlikely to cause harm of the type foreshadowed by Ms Jia. Any receiver will be limited to recovering $487,375.51 in circumstances where the vast majority of those funds are already held in New Stem's solicitors' trust account.

56 As I stated at the commencement of my reasons, upon the giving of the undertaking by Magellan to limit the terms of the appointment of any receivers, I refused the application for interlocutory injunctive relief at the hearing on 29 August 2025. Following the provision of my oral ruling, the parties agreed that the costs of the application ought to 'follow the event' and costs orders were made accordingly.

[1] The terms of the undertaking are set out in paragraph [40] below.

[2] [2006] HCA 46; (2006) 227 CLR 57 at [19] (Gleeson CJ and Crennan J) and [65]-[72] (Gummow and Hayne JJ with whom Gleeson CJ and Crennan J agreed).

[3] [2019] FCA 1006 at [38].

[4] Nicholas John Holdings Pty Ltd v Australia & New Zealand Banking Group Ltd [1992] VicRp 98; [1992] 2 VR 715 at 723.

[5] Bullock v Federated Furnishing Trades Society of Australasia [1985] FCA 19; (1985) 5 FCR 464 at 472.

[6] Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65, [35] (Maxwell P and Charles JA).

[7] Defined as 'a receiver or receiver and manager appointed under the [General Security Deed]'.

[8] The sum of $389,940 is calculated by deducting $140,000 from the original Amount Owing. That is so because pursuant to the terms of the Settlement Deed, the Discount Amount had also become due and payable to Magellan upon New Stem's default.

[9] In oral argument, counsel for New Stem conceded that the evidence filed on the application did not presently provide a foundation for contending that equitable recission of the Settlement Deed and General Security Deed should occur on the ground of unilateral mistake.

[10] Being the conversation set out in paragraph 18 of these Reasons.

[11] Being the conversation set out in paragraph 19 of these Reasons.

[12] Clause 12, on the state of the authorities, likely gives rise to an estoppel by convention: see Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60, 82-83 (Issacs J), 87 (Starke J); Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 2 Qd R 91, 94-98 (Carter J); Byers & Ors v Dorotea Pty Ltd (1986) 69 ALR 715, 725 (Pincus J).

[13] See for example, Bennett v Elysum Noosa Pty Ltd (in liq) [2012] FCA 211 at [40]- [41] (Reeves J).

[14] See, for example, Parkdale Custombuilt Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 198.