A $1 million pre-IPO investment was supposed to be only days away from an ASX application. More than two-and-a-half years later, there had been no application, no listing and no way out of the investment.
That left Iverson Partners Inc holding 2 million shares in Care A2, an Australian-owned nutrition company that manufactures infant and toddler formula.
The case began in Kuala Lumpur in July 2023. Iverson was an investment vehicle for Chee Kong Sun and his wife, Ying Ying Tan.
At a lunch with a long time acquaintance Russell Cotton, Mr Sun heard about an opportunity to buy pre-IPO shares in a company selling A2 infant and toddler formula.
Cotton followed up on WhatsApp. He said Iverson could invest up to $1 million at 50 cents per share before an IPO, described the opportunity as closed to everyone else, and said an ASX listing application would be submitted on 18 July. Listing, he said, was expected on 22 August.
Sun asked the obvious question: what happened if the application did not succeed? Cotton replied that the money would be returned if it was not successful within 90 days. He later said there would be a minimum buy-back at 75 cents within 12 months of listing.
Cotton then sent Sun a document he described as the “latest draft prospectus with forecasts”.
Care A2 Australia’s sole director, Kerry Hyland, then signed a letter offering Iverson 2 million shares at 50 cents each. The letter repeated the buy-back and refund terms, although it did not state a timetable for lodging a prospectus. Iverson accepted and paid $1 million in late July 2023.
The promised ASX application did not arrive. No application was lodged in August 2023 or at any time afterwards. When Iverson sought information, and later tried to find a buyer for its shares, it got nowhere.
A court notice to produce any prospectus or draft prospectus for Care A2 Australia also went unanswered.
The inevitable lawsuit came before Justice Scott Nixon in the NSW Supreme Court.
The court concluded there was never any prospects produced. It found that what Cotton had supplied to Sun was not a draft prospectus at all. It was a prospectus for an employee gift offer by a different company, Care Corporation involving 1,500 shares for eligible employees.
But what of Cotton’s standing to make representations on behalf of the company?
Care A2 argued that Cotton was a mere external consultant who could introduce potential investors. He was not – it alleged – someone authorised to make binding promises about an IPO.
The court disagreed. It noted that the company had engaged him to introduce investors, knew he used a Care A2 Plus email address and the title “Global Business Development Manager”, and he was communicating with Ms Hyland about Iverson’s investment.
Those facts gave Cotton “apparent authority”. i.e. from Iverson’s perspective, he appeared authorised to make representations while bringing the investor into the company’s share offer. His conduct was therefore treated as Care A2’s conduct.
Justice Nixon also found Cotton’s representations to have been misleading.
There was no reasonable basis for saying an application would be submitted on 18 July or that listing would happen by 22 August. The document passed off as a Care A2 Australia draft prospectus was unrelated to the company. The refund assurance was also misleading in its context: it conveyed that Iverson could expect its money back if no listing had occurred within 90 days of 18 July.
Ms Hyland’s position was different. It found that her role in sending the 18 July offer letter was essentially ministerial, and there was no evidence that she knew of Mr Cotton’s earlier representations or their falsity.
Signing a company letter did not, on these facts, make her personally liable for the company’s misleading conduct.
The court ordered Care A2 pay damages on the basis of a “no transaction case” i.e. to refund Sun his $1 million investment plus $223,167 interest, with him consenting to cancellation of his 2 million shares once paid.
The court declined to order the company pay Sun the profit on the shares he would have received had the listing gone ahead as promised.
Care A2 has also been found by the Federal Court of Australia to have infringed trade marks and engaged in misleading conduct against The a2 Milk Company
Iverson Partners Inc v Care A2 Australia Pty Ltd [2026] NSWSC 362, Nixon J, 16 April 2026.
