Bubs chair sues founder Kristy Carr, Dennis Lin and draws in Joe Hockey over $1.35m payment, page-2

Joe Hockey’s Bondi Partners dragged into Bubs legal dispute

Carrie LaFrenz

Senior reporter

Jun 28, 2023 – 1.57pm

Joe Hockey’s Bondi Partners has been dragged into the legal dispute at Bubs Australia, with the infant formula company claiming the terms of a $2 million consulting deal with the firm were not disclosed to the board.

Bubs’ former chief executive, Kristy Carr, and ex-executive chairman, Dennis Lin, are suing the company and its current directors in the Federal Court over their dismissal, alleging it was a breach of Fair Work rules. Ms Carr is also alleged she was bullied and harassed by Steven Lin, a director, and Bubs failed to provide a safe workplace. Steven Lin, the managing partner at Bubs’ largest shareholder, the Alibaba-backed C2 Capital, denies that allegation as does the company.

Joe Hockey’s US advisory Bondi Partners helped Bubs Australia gain entry into the US market. Evelyn Hockstein

This week, Bubs launched cross-claim alleging that Ms Carr and Dennis Lin breached their fiduciary and directors’ duties to shareholders and misused company funds. They outlined unwieldy spending on luxury hotels and an unauthorised commitment to pay $4 million to Citi if the company was sold.

According to documents filed with the court, Ms Carr signed an agreement worth more than $2 million with Bondi Partners, a high-profile political strategy and consulting firm, in June last year. While that deal was known to the board, the company alleges the terms were not disclosed, nor was a $US900,000 ($1.3 million) bonus payable to firm.

“Carr was not authorised to enter into the Bondi Partners agreement without disclosing the Bondi Partners bonus payment,” the documents read.

The baby formula group is now caught in the middle of a tussle between its new board, led by former King & Wood Mallesons partner Katrina Rathie, and dissident shareholders led by Ms Carr and Dennis Lin, who want to install former a2 Milk executive Peter Nathan as chief executive. Shareholders will vote on who should control the company on July 27.

At stake is the future direction of Bubs, one of the best performing Australian food brands in the past two years. Bubs became one of the first companies to win access to a lucrative market in the United States with the assistance of Mr Hockey’s Bondi Partners. The US allowed some overseas companies to import their products after a major domestic infant formula producer, Abbott Laboratories, had a contamination scare at its factory in Michigan.

Since then, however, Bubs has been mired in disagreement about its strategy to sell in China, the biggest formula market in the world.

In her Federal Court claim, Ms Carr alleges Bubs failed to provide “a safe and healthy working environment” for her during the past two years of her employment until she took personal leave on May 23.

This week The Australian Financial Review revealed that a draft report prepared by McGrathNicol raised issues around travel and personal expenses that should not have been charged to the company. “The independent expert analysis shows that the two former directors spent a total of $1,421,327 during the period 1 January 2022 to 31 May 2023 at a time when the business was unprofitable,” Bubs said on Wednesday.

Bubs said the experts’ review is ongoing. The draft McGrathNicol report also said to fully assess transactions against company policies it “requires additional information and context for the transactions”.

In its claim against its former executives, Bubs alleges that Dennis Lin used a corporate credit to rack up luxury accommodation in the 12 months to March including $85,912 with hotels owned by the Ritz-Carlton and Mandarin Oriental groups. The company alleges Dennis Lin, in May last year, used a corporate credit card to spend $2255 at the Ocean 12 cigar and karaoke bar atop Crown Melbourne, a payment which was not authorised.

The company also alleges a $4 million minium fee promised to Citi if there was a successful change of control transaction did not go through the proper authorisation processes.

In the weeks before Dennis Lin was sacked, Bubs claims he was asked not open any bank accounts in China in connection with a planned joint venture manufacturing deal, dubbed “Project Marathon.” It also allegedly asked him to pause the project and to not transfer any funds, which Dennis Lin allegedly ignored.

Citi, Ms Carr and Dennis Lin were contacted for comment.

More to come