Nature's Care Holdings Pty Ltd v Chen (No 5)

[2024] NSWSC 533

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Nature’s Care Holdings Pty Ltd v Chen (No 5) [2024] NSWSC 533

Hearing dates:

06 May 2024

Date of orders:

06 May 2024

Decision date:

06 May 2024

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Undertakings varied

Catchwords:

CIVIL PROCEDURE – inter partes undertakings – variation – undertakings not to act on behalf of the plaintiffs or give directions to plaintiffs’ employees – request by receivers of plaintiffs for assistance in relation to proposed regulatory audit

Cases Cited:

Nature’s Care Holdings Pty Ltd v Chen (No 2) [2024] NSWSC 107

Nature’s Care Holdings Pty Ltd v Chen (No 3) [2024] NSWSC 245

Nature’s Care Holdings Pty Ltd v Chen (No 4) [2024] NSWSC 379

Category:

Procedural rulings

Parties:

Nature’s Care Holdings Pty Limited (First Plaintiff)
Nature’s Care Group Pty Limited (receivers appointed) (Second Plaintiff)
AJ & Son Investment Pty Limited (receivers appointed) (Third Plaintiff)
Nature’s Care Manufacture Pty Limited (Fourth Plaintiff)
Nature’s Care Global Franchising Pty Limited (Fifth Plaintiff)
Australia Nature’s Care Biotech Co. Ltd (Sixth Plaintiff)
Jina Chen (First Defendant)
Michael Wu (Second Defendant)
AS Investment Vehicle Pty Limited (Third Defendant)

Representation:

Counsel:
P Afshar (First and Second Defendants)

Solicitors:
Norton Rose Fulbright (First and Second Defendants)
Lander & Rogers (Third Defendant)

File Number(s):

2024/23372

EX TEMPORE JUDGMENT (REVISED)

1. The background of this matter is set out in my earlier judgments. ^[1]

   1. Nature’s Care Holdings Pty Ltd v Chen (No 2) [2024] NSWSC 107, Nature’s Care Holdings Pty Ltd v Chen (No 3) [2024] NSWSC 245 and Nature’s Care Holdings Pty Ltd v Chen (No 4) [2024] NSWSC 379.

2. As I recorded in my 15 February 2024 judgment, the first and second defendants, Ms Chen and Mr Wu, had earlier given undertakings:

“Next, under the heading ‘Interference in operation of Plaintiffs’ business by First and Second Defendants’, the plaintiffs allege that Ms Chen and Mr Wu interfered in the operation of the plaintiffs’ business after they were dismissed as Chief Executive Officer and General Manager on 27 December 2023. Ms Chen and Mr Wu gave undertakings to Rees J not to engage in such conduct until the final hearing of these proceedings. Those undertakings were continued before me.

Accordingly, it is not necessary to consider them further, save in the context of consideration of the plaintiffs’ allegation that Ms Chen and Mr Wu were shadow or de facto directors during the periods that they were not actually directors.” ^[2]

2. Nature’s Care Holdings Pty Ltd v Chen (No 2) (supra) at [35]-[36].

3. The undertakings were:

“On 22 January 2024, each of the first and second defendants, Jina Chen and Michael Wu, gave undertakings that they will not:

a.   operate or allow or authorise anyone else to use or operate any cash or bank accounts of any entity in the Plaintiffs without the written approval of the board of the First Plaintiff or its duly authorised representative;

b.   enter into or purport to enter into any contract or other arrangement for or on behalf of any of the Plaintiffs, or deal in, acquire or sell any property of any of the Plaintiffs, or instruct any agent to give any such direction;

c.   make any statements or representations on behalf of any of the Plaintiffs or otherwise hold themselves out as having authority to manage the affairs, including without limitation as managing director, general manager or chief executive officer, or any of the Plaintiffs, or instruct any agent to give any such direction;

d.   lodge any document with the Australian Securities and Investments Commission (ASIC), or instruct any agent to lodge any document with ASIC, in relation to the Plaintiffs, or instruct any agent to give any direction to lodge such a document; or

e.   give any direction to employees of the Plaintiffs arising in connection with their duties as employees of the Plaintiffs, or instruct any agent to give any such direction.

(collectively, the Undertakings).” (Emphasis in original.)

4. In my reasons of 15 February I said, incorrectly I think, that the undertakings were given “to Rees J”. In fact, those undertakings were given to the first plaintiff.

5. By Notice of Motion filed in Court on 3 May 2024 the defendants seek to have undertakings (c) and (e) discharged so far as concerns Mr Wu.

6. On 3 May 2024, I made orders and directions for the service of the motion and the evidence and the affidavits in support of the plaintiffs. Those directions have been complied with. There is no appearance on behalf of the plaintiffs. There is evidence that the receivers of a number of the plaintiffs themselves support orders being made to the effect of those sought by the second defendant and evidence showing that at least some of the other plaintiffs also support the application.

7. The background to the matter is otherwise conveniently set out in Mr Afshar's brief submissions in support of the application:

“On 22 January 2024, the second defendant gave certain undertakings. They were recorded in paragraph 6 of orders made by Rees J on that day. The undertakings had been proffered in the course of an urgent interlocutory application brought by the plaintiffs before Rees J as vacation duty judge; they were extended on 25 January 2024 pending a more fulsome determination of the issues of the interlocutory application.

At the heart of that application was an attempt by the plaintiffs to enjoin the appointment of receivers. The application was determined by Stevenson J, who dismissed the application for an injunction with costs. His Honour noted that the undertakings given by the second defendant were extended until further order.

Since the time the undertakings were given, there has been a significant change in the circumstances of the plaintiffs and their stance towards the second defendant. First, on 18 March 2024, receivers were appointed to the shares of the first plaintiff, and to the second and third plaintiffs, and Clifford Chance, the plaintiffs’ solicitors, have ceased to act for them and the other plaintiffs. Second, and importantly, the second and third plaintiffs’ receivers have requested the second defendant’s assistance with an audit by the Therapeutic Goods Administration, the results of which are likely to have significant impact on the business of the Nature’s Care group of companies.

By way of a Notice of Motion filed on 3 May 2024, the second defendant seeks the discharge of the undertakings noted in paragraphs 6(c) and (e) of the orders made by Rees J on 22 January 2024, so as to enable him to comply with the receivers’ requests and assist with the audit. There is a question whether the undertakings were to the Court or inter partes, but that question does not arise on the application. The aim of the application is to ensure that the second defendant does not take any step or commit himself to taking any step that would contravene any undertaking whatever its nature. Despite being served in accordance with the orders made by the Court on Friday, 3 May 2024, none of the other parties appears to oppose the relief the second defendant seeks.

The evidence on the application, importantly the imminence of an audit the results of which would have a significant impact on the business of Nature’s Care, would satisfy the Court that it should exercise its discretion to relieve the second defendant of the relevant undertakings. That submission is fortified by the fact that the request for assistance comes from the second and third plaintiffs’ receivers, who have proposed limits on the second defendant’s involvement.” (Footnotes omitted.)

8. As I have mentioned, the undertakings were given to the first plaintiff rather than to the Court.

9. I discussed with Mr Afshar this afternoon whether, rather than the undertakings being unconditionally discharged, it would be more appropriate to limit them to reflect what the evidence shows Mr Wu's services are likely to be.

10. The result is that the orders I propose to make are as follows:

1. The undertakings given by the second defendant as recorded in pars 6(c) and (e) in the orders made by Rees J on 22 January 2024, the extension of which was noted in par 11 of the orders made by Rees J on 23 January 2024 and which were varied by me on 3 May 2024, be varied by adding, in Iieu of the words in my order of 3 May 2024, the following words as a qualification to undertakings (c) and (e):

“… but the second defendant may accept a consultancy from the receivers and managers of Nature's Care Group Pty Limited (‘the Company’) and provide services to the Company in accordance with the document entitled ‘Consultant Terms and Protocols’, a copy of which is annexed to this order.”

2. I grant the second defendant liberty to apply on short notice to seek any further variation to its undertakings as may be necessary.

3. I order those orders be taken out forthwith.

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Endnotes

Amendments

08 May 2024 - [6] Typographical error corrected.

Decision last updated: 08 May 2024