In another permutation of the business opportunity conundrum, this week started with the release of 189-page decision from the High Court in the long-running commercial dispute between the Mowbray brothers’ Zuru empire and JJK – the owners of rival nappy brand Treasures.
Central to the dispute was JJK’s acquisition and relaunch, in 2020, of the Treasures nappy brand after its Australian owner exited the New Zealand market.
Zuru, through the Rascals business it acquired (Rascals/Zuru), alleged that the founder and former director of the Rascals business had shared confidential information and diverted a corporate opportunity from Rascals/Zuru to JJK. And that it would have otherwise purchased the Treasures business and pursued a supply arrangement with the Countdown supermarket chain. Consequently, it claimed losses which ranged from $7.4 million to $20.6 million (approx.)
Claims against the Rascals founder and his father was settled before the case came to trial. As a result, the focus of the case was whether JJK and a related company (Taonga IP – which held Treasures related IP assets), were liable for their roles in the alleged wrongdoing.
In short, the judge rejected the claims in their entirety. Finding that whilst the Rascals founder remained formally a director of Rascals for a period after its business was sold to Zuru, that JJK’s directors neither knew, nor were wilfully blind to, that fact.
The diversion of corporate-opportunity claims also failed – on the basis that the Rascals founder did not have an ownership interest in JJK, was not a director or employee, and received no payment for his assistance. Therefore, he hadn’t breached a duty to the company by diverting a Rascals/Zuru opportunity for his own benefit.
And the breach of restraint of trade of claim against the Rascals founds also failed.
The judge also made important findings about misleading and deceptive conduct on the part of Zuru, albeit that JJK’s counterclaim was ultimately found to have been brought out of time (see below).
Background
Zuru bought the Rascals nappy business from the founder in 2020. A year later, Rascals/Zuru issued proceedings alleging JJK had used confidential information obtained from the Rascals founder to acquire the rival Treasures brand, an opportunity Rascals/Zuru said it was entitled to pursue. In the course of what appears to have been a pretty willing contest, Rascals/Zuru had raised its claim with Countdown, Treasures’ main customer, and threatening an injunction to block JJK’s nappy sales.
In a trial that lasted four weeks, in August 2025, and which received a lot of media attention at the time, no doubt, because of the cast of characters, there was testimony of records being deliberately destroyed. Those actions seem to have been impulsive because the key JJK characters were scared, and only partially successful because copies were retained by other recipients. So, as well as partial recoveries including through forensic efforts, the judge had to piece together a bit of an evidential jigsaw. This could have coloured the judge’s view of testimony.
Ultimately, it seems that the judge found the deletions to be relatively modest and that the witness evidence (about the extent of the deletions) was consistent – apart from two items that the judge found were overly favourable towards the claimants but were found to be unreliable/unconvincing. And rather than making a number of inferences (from the deletions) about JJK’s knowledge – the judge inferred that the founder was nervous about facing litigation – and read down the significance of the deletions.
Summary of Conclusions
Helpfully, the judgment contains a summary of the judge’s findings:
- Some of the claims against JJK and Taonga IP arise out of the fact that formally, the Rascals founder was still a director of Rascals when he began assisting JJK. However, even if the founder breached directors’ duties he owed to Rascals, JJK was not liable. That is because the JJK directors did not know and nor were they wilfully blind to the fact that the founder was still a director of Rascals.
- The Rascals founder would not have appeared to the JJK directors to have been a director and there was no evidence that the founder told them that he was still a director.
- JJK was not liable to Rascals/Zuru for encouraging the Rascals founder to breach his duty not to exploit a Rascals corporate opportunity for his own benefit. And the Rascals founder did not breach this duty because he did not personally benefit from JJK acquiring Treasures. He was not a director, shareholder, or employee of JJK. He had no beneficial interest in JJK, and he was not paid any fees by JJK. He gave JJK informal information and advice. For the same reasons, he did not breach his restraint of trade.
- There was no evidence that the Rascals founder informed the JJK directors that Rascals was interested in buying the Treasures brand.
- The case was really about confidential information. Whether the information that the Rascals founder gave to the JJK directors was confidential information, whether JJK knew or was wilfully blind to the fact that the information was confidential, and whether JJK unconscionably used any confidential information.
- Most of the information and advice the Rascals founder gave to JJK was not confidential information. It was either not Rascals’ information; or it was not information that was treated by Rascals/Zuru directors as confidential information. Rascals/Zuru directors disclosed the information to the business community at various business events.
- A subset of the information that the founder gave to JJK that was confidential, the JJK directors did not know and nor were they wilfully blind to the fact that it was confidential Rascals’ information. They may have been reckless and naïve, but they were not aware that the information was confidential.
- And JJK did not misuse the confidential information to the detriment of Rascals/Zuru in the way that Rascals/Zuru claimed – by depriving Rascals of the opportunity to buy the Treasures brand.
- Rascals/Zuru claim failed on causation. Rascals/Zuru did not prove that it was more likely than not that it would have bought the Treasures brand itself had JJK not been involved. Rascals/Zuru had an intermittent interest in buying the Treasures brand as a way of accessing the Countdown side of the supermarket duopoly but no firm plan to buy the brand.
- For JJK’s counterclaim, Rascals/Zuru made misleading and deceptive (in a Fair Trading Act context) statements about JJK to Countdown once it discovered that JJK had bought the Treasures brand. These statements caused JJK loss, because Countdown cancelled their purchase orders for Treasures nappies and required different terms which were less favourable to JJK. But JJK’s counterclaim under this heading was (only just – by a matter of a few weeks) time-barred – because such Fair Trading Act claims must be made within 3 years of the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought to reasonably have been discovered. (And the statements were made recklessly, but not maliciously, so Rascals/Zuru was not liable to JJK for malicious falsehood).
Sidebar – commercial leverage
During the trial, there was evidence that Zuru planned to acquire the Treasures brand as a means of accessing the other side of the supermarket duopoly, without infringing its exclusive arrangements with Foodstuffs. This went off the rails when it was discovered that JJK had purchased the Treasures brand.
As a result, it appears that it used its considerable commercial heft by raising concerns directly with Countdown and threatening to injunct JJK’s sales.
The judgment is something of a cautionary tale about getting your facts straight when making allegations that leverage a commercial position. Specifically, in this case the Fair Tarding Act claims would have succeeded had they not been time-barred.
Concluding comments
Whilst mapping out the fiduciary duties and the corporate opportunity doctrine, the judge stated that it is important not to conflate the duty of corporate opportunity with the duty not to misuse confidential company information. The two duties are distinct, although both duties may be engaged in some circumstances, and made the distinction:
- If a director exploits for their own benefit a non-public company opportunity, they may be liable to account to the company for their personal gain and for breaching their statutory duty not to misuse company information.
- If the director exploits a public opportunity for their own gain which they should have referred to the company, they will be liable to account for their profits, but they will not have misused non-public company information.
For more information, please do not hesitate to contact me.