Zoono fights US$390k distributor claim

Zoono specialises in hand sanitisers. Photo / Getty Images

Hand sanitiser maker Zoono, the covid-19 success story with a market cap of AU$485.93 million, is fighting a US$390,000 claim against its former Chinese distributor.

The Auckland company founded by Paul Hyslop has won an early bout in the case, initiated in 2019 by Shanghai-based Qingdao. Qingdao was set up as a special purpose vehicle for the distribution of the water-based santising products.

According to a judgment of associate judge Peter Andrew dated June 10, Qingdao claims Zoono breached its contract and must pay US$390,000 for sales made in China.

Zoono counterclaims, saying that it has suffered significant losses because its agreements were cancelled. The Botany-based company said Qingdao's director Lingchen Qi failed to source the capital he said he would, and which was necessary to establish the firm.

The case is yet to go to a full hearing but on May 25 associate judge Andrew in the High Court at Auckland heard that both sides wanted security for costs from each other. Such an application is made when a defendant thinks its opponent won't be able to pay costs if it loses.

Early agreement

Zoono said it decided to work with Qi after he claimed he had extensive and well-funded contacts who were willing to invest in the distribution of Zoono products in China, and promised shares in the distribution company.

Agreements were signed in May 2013, but by June 2014 Zoono cancelled them. After this a dispute arose between the parties over what to do with Zoono products that Qingdao still had.

While the parties came to a settlement in August 2014, the Chinese company thought that the agreement was a full and final settlement of all legal disputes, and that Zoono was to pay it US$400,000 within 18 months.

Zoono said the agreement meant it would pay a 10 percent commission of all sales by Zoono's new Chinese distributor, capped at US$400,000. It said that Qingdao breached its agreements and that Qi had made misrepresentations to Zoono.

While the case is at an early stage, associate judge Andrew remarked that the merits of Qingdao's claim were difficult to assess "in these circumstances where the agency agreement (being the central document in dispute) was not drafted by solicitors and is to be interpreted in a cross-cultural context."

The judge noted that in March, Zoono had BNZ bank accounts amounting to $3.5 million and that its financial position had significantly improved due to covid-19. He said Zoono should not have to pay security for costs.

However, he ruled that Qingdao should have to.

A Zoono company update on May 5 said the company had raked in $11 million in the month of April in business sales alone. Consumer online sales were closed for all but the last seven days of that month due to heavy demand.

- BusinessDesk