Bubs Australia files counterclaim against ousted founder, former chairman

The ugly board stoush at infant formula maker Bubs Australia will play out in court with the company suing the ousted chief executive and the former executive chairman for allegedly misusing company funds and spending big on luxury fashion, travel and accommodation.

In a cross-claim filed in the Federal Court in Victoria on Wednesday, the company has also accused founder and ousted boss Kristy Carr of entering an agreement to pay Joe Hockey’s US advisory firm Bondi Partners a $US900,000 ($1.35 million) bonus that was not disclosed to the company’s board.

Bubs Australia chair Katrina Rathie.
Bubs Australia chair Katrina Rathie.Credit: Louie Douvis

Hockey, a former treasurer and ambassador to the US, through Bondi Partners, helped broker a deal last year for the company to send more than 1 million tins of its formula to the US to help alleviate a serious baby formula shortage there.

The very public fallout between Carr and the company’s former executive chairman, Dennis Lin, on the one hand, and the current Bubs board, which is chaired by Katrina Rathie, will come to a head in late July when investors will vote on a motion brought by Carr and other investors to spill the board and install new leadership to the company.

But the disagreement will also play out in court: Carr and Lin have filed unfair dismissal claims in the Federal Court, alleging the business acted unfairly when it removed them from their roles as chief executive and executive chairman.

Bubs Australia filed a counterclaim this week, alleging Carr and Lin breached their fiduciary duties to the company and misused company funds during their tenure.

In court documents seen by this masthead, the business claims Carr used a company credit card to make unauthorised purchases, including $12,050 spent at Giorgio Armani and $US312 on a massage at the Ritz-Carlton hotel in California.

Other expenses Carr allegedly paid for using the company card include an $8227 Ferrari watch; $3807 on flights from Washington to Athens to attend a Greek Islands cruise; and an apartment in Brisbane’s waterfront suburb of Teneriffe at a rate of $850 a week for 88 weeks.


Bubs Australia also says that, while Carr disclosed an agreement made with Bondi Partners in June 2022 to the board, she did not disclose the terms including that the company would be up for a $US900,000 bonus payment to the firm due in July 2023.

The company alleges Lin was not authorised to spend more than $70,000 across the Marriott and Hyatt hotel groups and improperly incurred $5105.55 in expenses at Grand Hit Club, a Japanese bar and lounge in Sydney, on May 16, 2022.

Bubs Australia also claims that Lin was verbally instructed by board directors Rathie, Paul Jensen and Steven Lin on March 23 and 24 this year to pause its joint venture plans in China, not to open any bank accounts in relation to it, and not to attend a Heilongjiang factory site visit, but that Dennis Lin and Carr went anyway.

Carr and Lin are being represented by Clayton Utz while Bubs Australia has engaged Herbert Smith Freehills.

A date for the first case management hearing of Carr and Lin’s unfair dismissal claim has been set for August 25 and will be heard by Justice Michael Wheelahan.

In a statement, Carr said the company’s allegations against her were “untrue, baseless” and “a transparent attempt” to divert shareholders’ attention away from the lack of a strategy for the business.

“Throughout my time as CEO I have only ever spent company money on business activities, in the best interests of Bubs Australia. Any money spent by me has been properly accounted for and reported to the board on a monthly basis,” she said. “At no time has any of the money I spent been questioned or queried by the same directors who have now authorised the baseless and untrue allegations to be made against me.”

The Bubs Australia founder also accused the board of directors of “sling[ing] mud” against her and Lin by fooling shareholders with “untrue allegations”, and said media had been briefed before her lawyers were served the cross-claim at midday.

“All of this suggests that the board are seeking to play these allegations out in the media for the collateral purpose of prejudicing shareholders against me and Dennis Lin, and by association, the alternate board being proposed to shareholders,” Carr said.

“I am confident that the court will find that I have not engaged in any wrongdoing in respect of spending Bubs Australia’s money. I am also confident that the court will uphold the claims I have made against the board.

“In the court the board will have to back up the allegations they have made with facts and evidence. That is something they will not be able to do.”

The unfolding dispute has continued to drive down the company’s share price, which was down 2.7 per cent in late afternoon trading.

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Source: Thanks smh.com