The absorbing Zuru nappy trial, just concluded in the High Court at Auckland, pulled back a rarely pierced veil revealing the inherent tensions in start-up exits, the difficulty in defining “confidential” information, and the tricky dance suppliers perform with the grocery duopoly to boost their and supermarkets’ margins and deny competitors’ market access.
The counsel for Zuru, Campbell Walker, KC, presented to the court as methodical and thorough.
He delivered a claim pieced together from many dozens of hints in emails and scrawled meeting notes, and argued endlessly in cross-examination, that Treasures owner, the JJK Group, had mined a former director of Rascals for confidential information with both parties knowing full well that they shouldn’t.
Sam Lowery, acting for JJK, preferred a more thematic approach and characterised the case as driven by thwarted ambition and prosecuted with an extreme imbalance of power.
He said the litigation had seen a billionaire crush a former friend who he unfairly believed had wronged him, with JJK – a start-up almost strangled by Zuru before it had even sold its first nappy – as collateral damage.
The Herald successfully applied to Justice Dani Gardiner for access to the court file and – alongside regular attendance on the press bench during the four-week trial – has analysed more than 600 pages of submissions, briefs and evidence outlining the case, its protagonists, and its points of contention.
The plaintiffs: Zuru and the Mowbrays
Given its size and scale, and supply chains and markets circling the globe, Zuru – and its high-profile co-founder brothers who the NBR assesses are together worth $20 billion – barely need any introductions.
Zuru was founded by Nick Mowbray and his older brother, Mat Mowbray, in 2003 to sell China-manufactured toys internationally. The pair are today Zuru’s co-chief executives.
Its manufacturing is concentrated in China, its largest market is in the United States. Its New Zealand subsidiary records relatively modest revenues of $48 million.
Filings for this case saw Zuru describe itself as a British Virgin Islands company with registered offices in Hong Kong.
The court heard Mat is largely based in Hong Kong to oversee Zuru’s manufacturing and his presence at trial was constant but somewhat ethereal.
He elected not to submit evidence, and the court heard he did not use email and preferred to communicate through social media apps so there was little documentary evidence of his role.
His key role in crucial transactions – particularly leading the buyout of Rascals – is largely left for others to describe.
Anna Mowbray joined her brothers in Zuru in 2005, and her appearances in this proceedings were only cameos. She exited Zuru in 2023.
Nick came across as the central figure of this trial, being the driver of this legal action over the alleged theft of an opportunity he believes he rightfully deserved.
He occupied the stand across three days giving evidence and emerged as a frenetic social media messenger.
More than 200 pages of messages between him and his high school friend, Grant Taylor, were submitted as evidence, with his communications coming in rapid-fire short bursts of almost stream-of-consciousness text.
By 2016, Zuru had grown to become a major player in the toy market and was actively looking for new markets to expand into.
The court heard Nick’s holiday with friends in Bali in September of that year, where Grant was part of the vacation group, planted the seed for the dramatic play that ran in court all last month.
The settled defendant: The Rascals-founding Taylor Family
Grant Taylor attended St Peters Cambridge alongside Nick Mowbray and the pair had been friends since. Grant’s sister, Louise Stainthorpe, had a child with a bad skin condition who found nappies then on the shelves caused severe irritation.
Together with their father – policeman-turned-businessman Keith Taylor – the trio sought to make a better nappy and founded Rascals in 2014. A visit to China to scout factories found a manufacturer who could use inks not containing irritating formaldehyde.
Marketing focused on appealing to young parents. Prototypes were tested and a first container ordered.
The Taylors began selling nappies at baby shows in early 2016. Their brand was built and their business was off the ground and had gone from zero to $130,166 of sales in its first year of business.
In Bali, Grant and Nick Mowbray discussed rival brand Treasures. Nick claimed he was told the business was struggling and needed help. The pair kept talking and Nick offered his assistance in getting Rascals into supermarkets.
Nick and the Taylor family went into partnership in 2017. The Taylors maintained a bare controlling stake of 50%, with Nick having 40% and Grant Taylor and Nick’s school friend, Matt Banfield, getting 10%.
Nick said an agreement in principle was struck seeing a 50:50 split, but he wanted to bring Hong Kong-based banker Banfield – his “best friend” – back to New Zealand on board and sweetened his offer with some of his shares.
The Taylors had a different explanation for the structure.
Keith told the court: “We were wary of anyone having a controlling share in our company, particularly Nick, given what I knew of his personality and his extremely aggressive approach to business.”
Once a Mowbray-brokered exclusive deal with Foodstuffs was struck, sales exploded and reached more than $50m by 2020.
Who deserved credit for the success of Rascals became an ongoing sore point for parties during the four-week hearing.
Stainthorpe was not named as a defendant and made only a fleeting appearance in these proceedings. Her founding role in the company was acknowledged, and her father described her tears and devastation as the inevitability of the Mowbrays’ later buyout became apparent.
Keith Taylor settled with no admission of wrongdoing, seeing proceedings against him discontinued for the peppercorn sum of just $500. He provided strident evidence for the defence, and was accused by Walker of taking a gratuitous series of “digs” at the conduct and competence of Nick Mowbray.
Grant’s settlement was more complicated, and the shifting nature of his evidence is a key issue for Justice Gardiner to assess.
He was offered the option to either pay $4m for a clean settlement, or just $1m if he also provided a new brief of evidence helpful for Zuru’s case. He took the option of least cost.
“It’s not just pressure from the Mowbrays, it’s pressure from my family, it’s pressure from being in litigation for over four and a half years. It’s pressure to financially have an end game,” he told the court of his decision.
Last defendants standing: The JJK Group
The remaining defendant in this case, the JJK Group, was only formed in August 2020 as they prepared to bid on ailing nappy business Treasures.
Businessman Jarrod Armitage was the conduit between cosmetics manufacturer James Collie and former professional basketball player Kirk Penney. The trio formed a partnership with a view to trying to break into the nappy business.
Treasures’ owner, Asaleo Care, had tried and failed to sell the business over the past few years – including on-again, off-again negotiations led by Grant Taylor on behalf of the part-Zuru owned Rascals.
By mid-2020 Asaleo Care had thrown in the towel and said it could no longer compete with foreign-produced competitors.
Crucially for this case, Armitage was friends with Grant Taylor.
Armitage had first met Grant Taylor in 2019. They lived close to each other, and both were regulars at Coatesville cafe The Black Cottage. Nick Mowbray was also a regular customer there.
At this point in time, Grant had been bought out of Rascals by Zuru and was now subject to a contentious five-year restraint of trade.
He was still nominally a Rascals director, although no longer in the office or attending board meetings, during a sale washup period.
JJK and Grant did not dispute that they talked about the Treasures business, but claim Grant was alive to his restraint and only provided high-level advice and received no benefit.
The Treasures business sold in September 2020 after an auction process. Mowbray had offered just $200,000. JJK’s self-admitted hopeful bid of $300,000 was accepted.
It was a brief moment of euphoria for the partnership.
“It was a joyous time, ” Penney told the court.
“We’ve just secured Treasures and it’s been a cool journey that the three of us didn’t know we were going to be on, and here we are.”
When Nick finally got around in February 2021 to chasing up what happened to the Treasures brand, he immediately connected JJK’s Armitage with Grant.
Penney received a series of messages from Nick , alleging the theft of confidential information to enable their Treasures plans and demanded his embryonic nappy rivals cease preparations for launch.
“Treasures ends tomorrow. Or it’s on,” Mowbray said.
Mowbray’s suspicions intensified. In March 2021 he told Banfield he thought Grant was “full of s***” in denying involvement with JJK, as his osteopath had seen him and Armitage meet at The Black Cottage cafe and shake hands.
Banfield tried de-escalating. “They probably met and Grant said you need to leave me out of this Treasures stuff. Or could be saying something else. But shaking hands is very normal.”
Undeterred, the dispute rumbled on. Zuru filed proceedings in May 2021. It has taken more than four years for the case to reach trial.
Penney effectively folded in 2024 by selling his shares in JJK to Mowbray interests, who then proceeded to use their fresh stake to file proceedings against Armitage and Collie, alleging oppression of a minority shareholder.
Zuru deposed Penney in Wisconsin the month before trial to produce testimony helpful to the plaintiffs. Similarly with Grant, this evidence differed from what he delivered in person in court during the trial.
The mansion meeting: The disputed ‘Hobson’s choice’
What exactly happened and what was said at a testy meeting at the Mowbray mansion on March 5, 2020, could prove critical for the outcome of this case.
That meeting, between Grant and Keith Taylor, and Mat and Nick Mowbray, resulted in an informal agreement for Zuru to buy out the Taylors from Rascals.
But each side had markedly different recollections of what was offered and agreed to.
Keith and Grant Taylor gave evidence saying they felt strong-armed into a sale, with them claiming Nick Mowbray said if the offer to buy their share of Rascals for $30m was refused, Zuru would set up a competing business and crush them commercially and look forward to buying the brand for $1.
Keith characterised the offer as a “Hobson’s choice” as having an apparently hostile minority shareholder would make attempts to sell his family’s shares to a third party impossible.
The father and son both said at this time that a possible restraint was not raised, with the Taylors being told they could do what they liked after the sale.
A five-year clause prohibiting the Taylor family from being involved in selling nappies, directly or indirectly, to Woolworths was later included in the final sale and purchase agreement.
Nick Mowbray disputed this interpretation of events, specifically denied making the claim he looked forward to buying Rascals for $1, and said a restraint provision was raised at that meeting that underpinned their $30m valuation of the shares.
Only one party has evidence beyond memory from this meeting. Former policeman Keith wrote a file note in the aftermath recording the sale price of $30m was offered with “no restrictions”.
(The note also included a suggestion, said to be from Mat Mowbray, that the Taylors should invest their sale proceeds in shares in FAANGT companies – Facebook, Amazon, Apple, Netflix, Google, and Tesla – a Silicon Valley acronym that Keith Taylor admitted he was confused by: “I have never heard of it before.”)
JJK’s Lowery argued that the Taylors’ version of events should be considered more credible, which meant they were operating under “no restrictions” from March 5 and this should see the Taylors released of their obligations and duties to Rascals and disarm most of Zuru’s claims.
Justice Gardiner spent a considerable period of time quizzing Lowery about this argument during closing.
Both Keith and Grant Taylor cried giving evidence recalling the effects of this buyout negotiation on them and their families.
Walker, acting for Zuru, pushed back against suggestions by JJK that this meeting, and the wider case, was a “brutal” David versus Goliath mismatch.
Grant Taylor conceded under cross-examination he had used his share of the sale proceeds to buy a bach, a boat, a helicopter, and a succession of Ferraris.
Walker asked him if he was proud of building a business that resulted in a multimillion-dollar payday.
“I’ve learned that money doesn’t buy you happiness, that’s for sure,” Grant said.
The mansion meeting is also a reminder that while start-up exits are often presented as lottery-like wins for founders, there is no such thing as a free buyout.
Exits are inherently commercial transactions where both sides will inevitably seek to protect and promote their own interests.
Treasure hunters: The brand that could unlock exclusivity
The extent to which Zuru was actively pursuing Treasures by mid-2020, and the reasons why, are key to their argument that JJK stole this opportunity from them.
Central to the appeal of Treasures for Zuru was a restrictive exclusivity agreement with Foodstuffs which prevented it selling Rascals into Woolworths.
While much of the details of this exclusivity agreement - especially precise margin figures and deal lengths - was suppressed as confidential information, the court heard these deals allow both supermarkets and suppliers to generate higher margins.
Supermarkets benefit from exclusivity deals by having a brand’s marketing direct foot traffic to only their stores, and also prevent competitors from stocking certain product lines.
The court heard Zuru’s deal with Foodstuffs at the time of the Treasures sale prevented any new Zuru baby category brand being stocked in Woolworths.
The effect of these deals on prices or access to products for consumers was not addressed in open court.
Allegations made by Keith Taylor and JJK that the origin of the restraint in the Rascals sale deal came from Foodstuffs, presumably to hamper rivals Woolworths, was ruled irrelevant by Justice Gardiner.
Foodstuffs North Island chief executive Chris Quinn, initially called by the defence as a witness, was ultimately not required to give evidence.
Nick Mowbray said his deal with Foodstuffs had effectively locked Rascals out of half the market: “I saw us getting sales into Countdown as a prime opportunity of growth.”
Acquiring a brand with pre-existing sales into Worthworths, such as Treasures, was one such opportunity.
Evidence presented by Zuru showed a series of approaches for Treasures from April 2019, with internal discussions spit-balling offers of up to $5m for the brand.
There was also an understanding that Treasures was losing money and may be close to collapse so waiting might secure a cheaper price.
That collapse eventually occurred, triggering JJK’s successful offer of $300,000. Nick Mowbray bid just $200,000 and he said he “became increasingly concerned” after he had not heard back about his offer.
Lowery, acting for JJK, drew considerable attention to the 164-day gap between Mowbray’s bid and his request to his lawyers to chase up who had ended up with Treasures.
“The plaintiffs have not produced a single internal document mentioning a possible acquisition of Treasures during that period. The inference is that there are no documents because Treasures fell off the radar as soon as Mr Mowbray sent his email on 24 August 2020.”
Lowery also said Grant Taylor chased up Zuru’s interest in Treasures in June 2020, and was told by an executive: “Na didn’t go after it in the end, said thanks but no thanks.”
Justice Gardiner had a long discussion with Zuru’s lawyer, Walker, in closing about what the $200,000 offer meant about Zuru’s real assessment of Treasures’ value and their interest in the opportunity.
“You might call it a fire sale, but you might just call it fair market value,” Walker said.
Closing arguments: Good faith and deleted documents
For Zuru’s claims to succeed it needs to prove that not only was Grant Taylor under obligations not to disclose confidential information, but also that he did disclose such information to JJK, and that JJK had procured it from him.
The main line of defence for JJK in closing arguments was good faith.
Lowery said JJK were alive to Grant Taylor’s restraint, had initially relied on his assurances he was allowed to provide high-level advice, and then distanced themselves from him – including scotching plans to engage him formally as a consultant – following legal advice which said while the restraint was likely unenforceable it raised a slim possibility of risk from Zuru.
Each side also had sharply different interpretation of a message Collie had sent to his fellow JJK directors in July 2020, as they prepared to bid for Treasures.
“We also need to be really careful that it doesn’t come out that Grant is involved or Zuru will literally go all out war against us,” Collie said.
Lowery said this reflected concerns from JJK that they didn’t want to get caught in legal crossfire between Zuru and Taylor, while Walker said it proved they knew what they were doing was wrong and that it needed to be concealed.
Zuru’s main thrust of arguments in closing drew attention to not only the considerable amount of evidence presented that Walker believed proved his case, but the evidence which was no longer available.
As legal threats from the Mowbrays escalated, Grant Taylor told the court he made an impulsive decision in 2021 to delete some communications.
“I think I hoped that would make things go away,” Taylor told the court.
Penney had admitted he did similar after hearing of Taylor’s “panic”.
Walker said the court should draw adverse inferences about evidence the court was unable to see.
“The practical consequences of the deletions is that we don’t know about most of the relevant communications. We do have some, and they’re damning, and the court should assume those that were deleted are even more damning,” he said.
But this trial has not been all corporate manoeuvring, secret recordings, personal devastation, and accountants quibbling over which CPI measure best accounts for nappy inflation.
There have also been jokes, although the humour was not always appreciated by all parties.
During the third week of trial Walker, on behalf of Zuru, objected to a comment from Armitage that further questioning revealed was considered to be a joke.
Justice Gardiner subsequently issued a minute: “I ordered that the joke Mr Armitage made about not wanting to meet Nick Mowbray on his boat, and the reason why, was suppressed from publication.”
The Herald cannot possibly comment as to whether this joke was funny.
Justice Gardiner has reserved her decision.
Matt Nippert is an Auckland-based investigations reporter covering the intersection of politics and business. He has won more than a dozen awards for his journalism – including twice being named Reporter of the Year – and joined the Herald in 2014 after having spent the decade prior reporting from business newspapers and national magazines.