The High Court at Auckland has just wrapped the second week of the Zuru nappy trial. Photo / NZME
Keith Taylor, patriarch of the family who founded the Rascals nappy business, spent nearly all of Friday facing cross-examination over his strident brief of evidence delivered late Thursday at the Zuru nappy trial.
Taylor’s brief delivered at the High Court at Auckland contrasted with billionaire Nick Mowbray’s earlier evidence about the viability of Rascals before Zuru’s involvement and how the consumer good conglomerate came to buy out the family in 2020.
The case, filed in 2021, has the now Zuru-owned Rascals making claims against its former partners in the business and a trio of businessmen who acquired a rival diaper brand shortly after the Taylors were bought out by Zuru, owned by Nick and Mat Mowbray.
Proceedings against Keith Taylor and his son Grant, alleging breach of restraint provision and disclosure of confidential information, were settled on the eve of trial.
The case has continued against the JJK Group, which Zuru alleges was provided confidential information allowing it to poach ailing nappy brand Treasures. Zuru is seeking more than $75 million in compensation and damages.
Keith Taylor on Thursday claimed a $30m buyout offer from Zuru for his family’s 50% interest in Rascals amounted to a “Hobson’s choice”, with the Mowbray brothers threatening to start a new brand and run Rascals out of business if they didn’t agree to sell.
Taylor also said a restraint clause, covering just the sale of baby products into Woolworths (Rascals at the time had an exclusivity deal with rival grocery firm Foodstuffs), was inserted late into the sale agreement, and he believed it was an anti-competitive measure.
Campbell Walker, KC, acting for Zuru, took issue with Taylor’s version of events, ranging from his understanding of the difference between gross and net profits and his characterisation of the Mowbrays’ lodgings.
“My reading of this and observing you give your evidence yesterday is that through your brief, you take every chance you can, to put it simply, stick it to Nick Mowbray. Is that fair?” Walker asked.
“No,” Taylor said. “It’s not a case of putting the boot into somebody. I think it’s a case of just telling what are the facts.”
Walker questioned the characterisation of the Mowbrays’ residence in Coatesville as a “mansion”.
Taylor said the name of the sprawling estate was well-known. “I think it’s widely known in New Zealand as such from its previous history,” he said.
The property has generated a high profile from its current owners and previous residents, Kim Dotcom and the Chrisco hamper founders.
“But the object of calling it a mansion is to suggest that they’re sort of slightly about themselves, isn’t it?” Walker asked.
Taylor said the Mowbrays themselves called it such: “We were invited by them to go to the ‘mansion’ ... that’s what they called it.”
Taylor took issue with Nick Mowbray’s evidence about overseeing the rollout of a leak-guard on Rascals nappies, citing a 2015 factory order that included the feature before Mowbray’s involvement.
“So that’s another dig at Nick Mowbray?” Campbell said.
“It’s not a dig. It’s a fact. I’m sorry you take it that way but it’s factual,” Taylor said.
Campbell also took issue with Taylor’s evidence that Mowbray had overstated his credit for the growth of Rascals. The billionaire had claimed that after his involvement, an unprofitable business went from about $100,000 in annual sales to more than $40m in three years.
Taylor conceded his quantification of “profits” provided for early Rascals operations in his evidence was gross and not net, and did not include years of start-up costs or salaries for his family, which were written off as sweat equity.
He nonetheless said Rascals was a financial success: “For a start-up to not run at a loss is a great achievement, and we achieved that.”
Taylor was challenged on his dismissal of Mowbray’s contribution to the brand’s success, citing its $41m in turnover for the 2020 year.
“That’s at the end of 2020, no denying, it grew crazily. When finally we got involved in the supermarkets, Nick brought that forward. He helped accelerate it. That’s why we gave him 40% of the company. It wasn’t for nothing,” Taylor said.
Taylor was also quizzed on the inclusion of a restraint clause he was earlier alleged to have breached, and said it was only raised late in sale negotiations and after his family had realised they were in negotiations with billionaires and lacked leverage and had no choice but to sell.
Nick Mowbray’s evidence said a restraint was part of their initial buy-out offer, a claim Taylor – citing contemporaneous notes – disagreed with.
Taylor said the restraint clause, just covering the sale of nappies to Woolworths, was initially said by Nick Mowbray to be at Foodstuffs’ behest. Attempts by the Taylors to determine why a supermarket giant would involve itself in private sale negotiations to disadvantage a rival proved fruitless.
By mid-April, discussions with Mat Mowbray revealed Zuru was now claiming ownership of the restraint clause and made it non-negotiable.
“It was only in that discussion that it became clear that it was a bottom line for the Mowbrays and Zuru as well. This took us by surprise,” Taylor said.
Taylor said after initially opposing the restraint, this “late change of course” prompted him to seek to quickly distance his family from the Mowbrays.
“On this point and the history of aggressive business practices and litigation meant that it was best to get as far away as possible,” he said.
The trial, which just concluded its second of four scheduled weeks, continues.
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.