Rascals International Ltd v Taylor - [2026] NZHC 2279

The first and second plaintiffs’ claim against the third and fourth defendants is dismissed. The third defendant’s counterclaim against the first plaintiff is dismissed.

HELD: The first and second defendants were founders, directors and shareholders of the first plaintiff, a nappy company. In early 2020, the first and second defendants were bought out of their shares in the first plaintiff. The sale and purchase agreement included a restraint of trade for the first and second defendants, beginning when their resignations as directors took effect.

While the first and second defendants were not practically involved in the business from 1 May 2020, they remained directors until 3 August 2020. Beginning in July 2020 and continuing throughout the year, the first defendant gave regular but informal advice to the directors of the third defendant, a company in the process of purchasing the struggling but well-known nappy brand, Treasures. The third defendant ultimately had Treasures nappies stocked in Countdown. The first defendant had no financial stake. The plaintiff claimed that the first defendant had breached his directors’ duties and restraint of trade. The first defendant settled prior to trial. The claim against the third defendant was for its role in causing the first defendant’s breaches. The fourth defendant is a company that holds some of the relevant assets.

The following factual findings were significant. The first defendant only gave a very limited amount of confidential information to the third defendant. The directors of the third defendant did not know and were not wilfully blind to: some of the information being confidential; and the first defendant continuing to be a director. While the plaintiff had an interest in acquiring the Treasures brand, this was not a firm plan and, in any event, the third defendant was unaware of it. The Court accepted that the first defendant continued to owe statutory and fiduciary duties until his resignation took effect on 3 August 2020, as well as further obligations of confidence and not to exploit the plaintiff’s corporate opportunities for his own gain.

The claim in breach of confidence against the third and fourth defendants failed due to: the very limited amount of confidential information shared; the lack of knowledge of or wilful blindness to it being confidential; the limited use of the information; and the lack of use to the first plaintiff’s detriment. The claim in dishonest assistance failed as the third defendant had not dishonestly assisted in the breach of duties by the first defendant.

The claim of knowing procurement of breaches of statutory and fiduciary duties required the recognition of a novel tort, which was not considered necessary on the facts. If available, it would have failed due to the third defendant’s lack of knowledge or wilful blindness to breaches.

The claim in unlawful conspiracy relied on the use of unlawful means. As none of the causes of action had been proven, no unlawful means were found. Further elements were not met: there was no intention to harm the first plaintiff; and damage had not occurred.

The claim in constructive trust against the fourth defendant failed as it relied on causes of action against the third defendant which were not proven. The Court noted that, even if liability had been made out, the plaintiffs had been unable to prove that the actions of the third defendant caused loss.

The counterclaim was filed by the third defendant after a representative of the first plaintiff told Countdown, who was stocking the third defendant’s nappies, that the third defendant had acted unlawfully. The counterclaim for misleading conduct failed due to a three-year limitation provision. But for the limitation provision, the Court considered that the claim would have been made out. The counterclaim for injurious falsehood was not made out due to the lack of malice, as the representative genuinely believed his statements to be true.