Nature’s Care Holdings Pty Ltd v Chen (No 2)

The case before the court involved Nature’s Care Holdings Pty Ltd, a company in default under a Syndicated Facility Agreement, and Chen, a minority shareholder who had acquired the rights of the lenders under the agreement. The directors of Nature’s Care Holdings had argued that Chen's acquisition of the lenders' rights breached their fiduciary duties to the corporate group members. A vacation duty judge had previously issued interlocutory orders restraining Chen from exercising the acquired rights, and the court was asked to determine whether a serious question to be tried existed, and if so, whether the interlocutory injunction should be continued.

The primary legal issue before the court was whether Chen's acquisition of the lenders' rights was a breach of the directors' fiduciary duties to the corporate group members. The court also needed to assess the balance of convenience to determine if the interlocutory injunction should be maintained. The court had to consider whether there was a serious question to be tried that warranted the continuation of the injunction, taking into account the potential harm to the corporate group members if the injunction were not upheld.

The court found that there was indeed a serious question to be tried regarding whether Chen's acquisition of the lenders' rights breached the directors' fiduciary duties. The court considered the nature of the rights acquired and the potential impact on the corporate group members if the injunction were lifted. The balance of convenience was found to favour maintaining the interlocutory injunction, as the potential harm to the corporate group members outweighed any inconvenience to Chen. Therefore, the court decided that the interlocutory injunction should be continued.

The court ordered that the interlocutory injunctions restraining Chen from exercising the acquired rights would remain in place until the final determination of the case. The court also noted that the continuation of the injunction was subject to review at any time if circumstances changed. This decision reinforced the importance of protecting the interests of corporate group members and ensuring that minority shareholders do not acquire rights in a manner that breaches fiduciary duties.