Grant Taylor (left) and Zuru founder Nick Mowbray when the pair were partners in nappy business Rascals. Photo / Supplied
A $30 million diaper deal has soiled, with behemoth consumer goods conglomerate Zuru taking its former partners in a nappy business to court claiming tens of millions of dollars in losses from breached confidentiality and restraint provisions.
The defendants strongly deny the claims and will contest them in a four-week civil trial starting in the High Court at Auckland today.
The case largely centres on the soured relationship between Nick Mowbray and Grant Taylor, one-time high school friends and later business partners, who have spent the past four years lawyering up as a dispute surrounding the sale of nappy business Rascals turned toxic.
Zuru filed proceedings in 2021, just a year after buying out the Taylor family of the Rascals nappy business.
Zuru’s own court filings describe itself as a British Virgin Islands company with registered offices in Hong Kong.
Zuru’s claims are primarily against Taylor, alleging he breached restraint provisions in the sale agreement and disclosed confidential information to businessmen who took over rival nappy brand Treasures.
The suit also names Keith Taylor, father of Grant, and JJK Group, which acquired Treasures in 2020, as defendants.
Taylor and the other defendants deny the claims and have signalled they will be vigorously defended.
Zuru claims these breaches and disclosures caused it to lose tens of millions of dollars – Zuru claims the amount of damages it is seeking is confidential – from the lost opportunity to purchase rival nappy brand Treasures.
Zuru was founded in 2003 by the Mowbray siblings to manufacture toys in China to sell through big-box retailers internationally, but has in recent years branched out into consumer goods.
The business has vaulted the Mowbrays into the ranks of New Zealand billionaires.
Their push for growth into new markets led to Zuru partnering with local nappy brand Rascals in 2017 and taking the brand international, particularly into the United States market.
Taylor had, alongside his sister, founded Rascals in 2016, and he and Nick Mowbray are reportedly friends from high school.
The subsequent growth of Rascals led to Taylor being named EY’s entrepreneur of the year for product in 2019, the same year the company topped the Deloitte Fast 500.
The following year Zuru bought out the Taylors for $30m to fully control the local and domestic arms of Rascals.
However, the deal – and the friendship between Nick and Grant – quickly soured, leading to legal action.
Details of Zuru’s claims came to light after the conglomerate took action in Wisconsin courts earlier this year to subpoena former Tall Blacks star Kirk Penney, a former partner of KKR Group, to gather evidence for the upcoming trial in Auckland.
Penney was a shareholder and director, with two other businessmen, in JJK Group, which purchased rival, and formerly locally-manufactured, nappy brand Treasures in late 2020.
Treasures’ previous owner Asaleo Care announced it was closing the business in mid-2020 over an inability to compete with low-cost imported rivals.
Rascals notes on its website that its own products are “made with care in China”.
Zuru claims Taylor disclosed confidential information to JJK about the nappy business and breached restraint provisions in the sale agreement, claims Taylor denies.
Zuru’s unredacted statement of claim in the Auckland case was included in filings to the District Court for the Eastern District of Wisconsin as part of the Penney subpoena.
After Herald requests for comment about the details of its claims, a lawyer acting for Zuru refiled the statement of claim, redacting information that the company considered confidential or commercially sensitive.
Nick and Mat Mowbray did not respond to requests to comment on the case or claims made by the defence.
Taylor also said he did not want to comment, but lawyers acting for him released his statement of defence after being informed the applicants had disclosed their statement in US court filings.
Taylor claims to have been friends and neighbours with one of the JJK principals, and any information disclosed was not confidential. He also said he ceased negotiations to buy Treasures once it was clear a restraint clause would be included in the final sale agreement.
“Designing and producing nappies is not complicated,” Taylor said in his statement of defence, disputing Zuru’s description of some information as confidential or a commercial secret.
Penney exited JJK Group in August last year when he resigned as a director and his shares in the parent company were bought by Treasures Holdings. The Companies Office lists two of Treasures Holdings’ three directors as Nick and Mat Mowbray.
This shareholding appears to have created an unusual situation where Zuru is suing a defendant that it partly owns.
Penney recently moved to the United States to take up a position as special assistant to the head coach of the Wisconsin Badgers basketball team, a team where he made his name as a collegiate player two decades ago.
Zuru’s subpoena request states Penney “is not a party to the New Zealand litigation, and Zuru has no intention to make him a party to the litigation”.
Attempts to reach Penney for contact were unsuccessful.
Sam Lowery, a lawyer acting for the JJK Group, said the claims were denied and a counter-claim alleging interference with Treasures retailers was afoot.
“From JJK’s perspective, Rascals’ case is hopelessly misguided. JJK has done nothing wrong and we look forward to that becoming clear at the public trial,” Lowery said.
Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and 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.