Rascals International Ltd v Taylor
[2025] NZHC 2413
•25 August 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1041
[2025] NZHC 2413
BETWEEN RASCALS INTERNATIONAL LIMITED
First Plaintiff
ZURU INC
Second PlaintiffAND
GRANT BRUCE BYRON TAYLOR
First Defendant (Discontinued)
KEITH ROBERT TAYLOR
Second Defendant (Discontinued)JJK GROUP LIMITED
Third DefendantTAONGA IP LIMITED
Fourth Defendant
Hearing: On the papers Appearances:
C T Walker KC/J W J Graham/S Patel for the Plaintiffs S M Lowery/M Pitt for the Third Defendant
J C Suyker for the Fourth Defendant
Date:
25 August 2025
JUDGMENT OF GARDINER J
[Leave to amend claim]
This judgment was delivered by me on 25 August 2025 at 12.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
RASCALS INTERNATIONAL LTD v TAYLOR [2025] NZHC 2413 [25 August 2025]
Introduction
[1] The plaintiffs seek leave to amend their claim to include a claim that JJK Group Ltd (JJK) knowingly and intentionally procured Grant Taylor’s breach of the restraint of trade provision in the sale and purchase agreement for the Taylors’ interest in Rascal and Friends NZ Limited (Rascals NZ) and Rascals International Ltd. JJK and Taonga IP Ltd oppose the grant of leave.
[2] The plaintiffs signalled this application on Wednesday 20 August 2025, the 11th day of the trial. By then, the defendants had opened their case and called their third witness, James Collie. I heard brief argument on Wednesday, and asked the plaintiffs to file written submissions, with the defendants to file any submissions in reply within a further 24 hours. The plaintiffs filed their submissions at around 2 pm on Thursday and the defendants filed their submissions at around 9.30 am on Friday.
Proposed amendment
[3] The current seventh amended statement of claim has a ninth cause of action against JJK in knowing procurement of breach of duties. The relevant duties relate primarily to Mr Taylor’s corporate duties to Rascals NZ.
[4] The proposed amendments would be to paragraphs 100 and 101 of the ninth cause of action. The amendment to paragraph 100 would be to add reference to paragraph 91 (which sets out the restraint) as a relevant duty owed by Mr Taylor. The amendment to paragraph 101 would be to add reference to paragraph 97 (wherein the plaintiffs allege that Mr Taylor breached the restraint). The plaintiffs have provided a copy of the relevant page of the pleadings setting out those changes.
[5] The plaintiffs say that the proposed amendment arises because of late disclosure of when JJK had direct knowledge of the restraint and the legal advice they then obtained.
[6] The plaintiffs say that, although Mr Taylor referred in his brief of evidence to receiving advice on his restraint from JJK’s lawyers, that had not been referred to in any brief of evidence for JJK. On the contrary:
(a)Mr Collie’s evidence (paragraph 24) says he did not know details of Mr Taylor’s restraint; and
(b)Jarrod Armitage does not mention whether or not he knew the terms of Mr Taylor’s restraint in his brief.
[7] The plaintiffs say that they asked for documents concerning the restraint of trade in their lawyers’ 19 June 2025 letter. On 7 July 2025, the response was that “there are no non-privileged documents responsive to this request”. Yet during the trial the defendants provided two photographs of the restraint clause found by Kirk Penney on his phone. One photograph had a date stamp on it and indicated that it came from a WhatsApp conversation with Mr Taylor and was sent on 5 August 2020.
[8] Further, on 13 August 2025, JJK’s counsel waived privilege over documents concerning the restraint of trade.
[9] The plaintiffs say that it was only as a result of these documents, the waiver of privilege and JJK’s opening that the extent of JJK’s involvement — in receiving and reviewing Mr Taylor’s restraint, seeking advice on it, and advising Mr Taylor — has become fully apparent. In particular, it was only then that the plaintiffs knew with certainty that JJK was aware of the precise terms of the restraint of trade.
Legal principles
[10]Leave is required to amend a pleading during trial.1
[11]The following principles apply to an application for leave to amend pleadings:2
(a)The paramount consideration is that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding.
1 High Court Rules 2016, rr 1.9(4) and 7.7.
2 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
(b)Due regard must also be had to whether the proposed amendment will cause significant delay or prejudice another party.
(c)Even where serious prejudice and significant delay will arise, an amended pleading may nevertheless be permitted if the proposed claim has substantial merit and will not cause injustice to the defendants.
(d)The Court should consider the merit, or absence thereof, in a proposed amended pleading.
[12]As the Court of Appeal recently affirmed in Hong v Kinnon:3
Rule 1.9(2) allows the court, on application or its own initiative, to amend pleadings at any stage of a proceeding when necessary to determine “the real controversy between the parties”. It is an expansive power, not limited to defects or errors. The amendment must be in the interests of justice, not cause significant prejudice to the other party and not cause significant delay. This Court has suggested that it is inappropriate to refuse to make an amendment to denounce a party's conduct.
(footnotes omitted)
Assessment
[13] I decline to give the plaintiffs leave to amend their claim for the following reasons.
[14] First, the plaintiffs had sufficient information to bring a claim against JJK for procuring Mr Taylor to breach his restraint of trade before this point. In particular:
(a)Mr Penney’s 15 June 2023 response to interrogatories disclosed that JJK knew Mr Taylor was subject to a restraint. Mr Penney stated the JJK directors asked Mr Taylor if he wanted to join the business, to which Mr Taylor responded he could not because he had a restraint of trade.
3 Hong v Kinnon [2025] NZCA 117 at [41].
(b)Mr Taylor’s 4 June 2025 statement of defence disclosed that JJK’s solicitor had called him to discuss his restraint of trade.
(c)Mr Taylor’s brief of evidence stated:
… They asked me about the restraint, and offered to have their lawyer take a look at their restraint. To appease them I showed the restraint in the sale and purchase agreement to them and reiterated that I didn’t want to be involved. I think their lawyer called me about in early August. I remember that he told me that he thought that it was likely that it was unenforceable, but that there would still be some risk.
(emphasis added)
(d)Mr Armitage’s brief of evidence said that Mr Taylor told JJK a formal role might breach his restraint of trade (paragraph 31).
(e)Mr Collie’s brief of evidence said that Mr Taylor told JJK he could not consult to them because of a restraint of trade he had after leaving Rascals (paragraph 16(b)).
(f)At Mr Penney’s deposition, held on 21 July 2025, ZURU’s counsel asked Mr Penney whether “JJK's lawyers looked at the restraint of trade”. Mr Penney confirmed he sent the restraint of trade to Dentons for that purpose.
(g)Mr Taylor’s 29 July 2025 affidavit, drafted as part of settlement discussions between him and the plaintiffs, stated:
I had referred to my restraint of trade in early communications with Mr Armitage. Despite this, Mr Armitage, Mr Penney and Mr Collie were keen for me to join with them and offered me part ownership of the business. I remember telling them that I could not be involved because of the restraint. I also recall that I showed them the Sale and Purchase Agreement to show that I had a restraint and could not be involved. I cannot recall precisely when I showed this agreement to them, but it was early on.
As part of JJK’s effort to involve me, Mr Armitage offered to have his lawyer review it. Mr Armitage and his lawyer then called me sometime in August. I recall that his lawyer told
me that the restraint may not be enforceable, but there would still be some risk.
(emphasis added)
(h)The plaintiffs opened on the basis that JJK had received a copy of the restraint of trade and took advice on it.
[15] The plaintiffs are overstating the significance of the information disclosed by the defendants during the trial. They were already aware that the JJK directors knew of Mr Taylor’s restraint of trade, that Mr Taylor had shown them the restraint, and that Mr Penney had sent the terms of the restraint to JJK’s lawyer for review. Mr Penney’s belated discovery of images of the restraint terms on his phone only confirms something that was already known and pinpoints the specific date on which Mr Taylor provided the terms to Mr Penney.
[16] Second, the proposed amendment introduces new issues into the case against JJK.4 These are:
(a)Is the restraint of trade valid?
(b)If so, did Mr Taylor breach the restraint of trade?
(c)Did JJK knowingly and intentionally procure Mr Taylor’s breach of the restraint of trade?
[17] The question of the restraint’s validity raises new factual and legal issues that will add to the hearing time and likely cause delay.
[18] If leave is granted to permit the amendment, the defendants will seek to amend their defence to say the restraint is unreasonable and therefore unenforceable pursuant to s 83 of the Contract and Commercial Law Act 2017.
4 In my view, the amendment would have been more properly proposed as a new cause of action because the contractual restraint of trade is of quite a different character to Mr Taylor’s corporate duties.
[19] They will need to be given the opportunity to adduce evidence in support of that defence. They indicate that they would need to recall Nick Mowbray, as counsel did not put to him that the plaintiffs paid no consideration for the restraint, and the restraint did not protect any proprietary interest or goodwill of the plaintiffs. They may also subpoena Mat Mowbray, who negotiated the restraint for the plaintiffs and represented it as a Foodstuffs demand. His evidence would be required to assess the reasonableness of the restraint. The defendants may also seek to call expert evidence as to the reasonableness of the restraint in the context of New Zealand’s supermarket duopoly. These indications are reasonable and would be required to meet the new factual and legal issues raised by the amendment.
[20] Furthermore, additional time would be needed to prepare closing arguments on the validity of the restraint. This is a new legal issue that the defendants have not been required to consider as it was not pleaded against JJK.
[21] The trial schedule is already extremely tight. As matters stand, the parties need to get through eight witnesses (and re-examine Mr Taylor) in 2–3 hearing days. There is a real risk that the additional factual and legal issues raised by the amendment would result in the trial being adjourned part heard.
[22] Third, and critically, the amendment does not have sufficient merit to warrant taking this risk.
[23] The plaintiff’s theory is that information and advice provided by Mr Taylor to JJK enabled JJK to acquire Treasures and thereby denied the plaintiffs the opportunity to acquire the brand, grow their share of the nappy market, and make profits in Countdown supermarkets. The proposed amendment does not materially advance that theory.
[24] The restraint of trade was not triggered until 3 August 2020, when the wash-up period concluded and Mr Taylor’s duties as a director of Rascals NZ formally ended. The restraint prohibited the Taylors from directly or indirectly designing, producing, or selling nappies to Woolworths (formerly Countdown) for five years. It appears from the evidence that JJK reached an in-principle deal with Asaleo Care to acquire
the Treasures brand for $300,000 on or around 7 August 2020. At that time, JJK was still in the very early stages of its discussions with Countdown, the second meeting with Lisha Young only taking place on 5 August 2020. JJK was many months off designing, producing, or selling a Treasures nappy to Countdown. The agreement between Asaleo Care and JJK for the sale and purchase of the Treasures brand was executed on 8 September 2020.
[25] Under the proposed amendment, the plaintiffs’ case would have to be that Mr Taylor aided JJK in reaching the deal with Asaleo Care to acquire the Treasures brand by indirectly designing, producing, or selling Treasures nappies to Countdown in breach of his restraint of trade, between 3 August 2020 when the restraint was triggered and 8 September 2020 when the agreement with Asaleo Care was executed (or possibly earlier, on or about 7 August when the deal was agreed). I cannot see any basis upon which such a claim could succeed.
[26] It follows that I do not accept that the amendment is necessary to ensure the real controversy is determined. The amendment would be a distraction from the real controversy: whether Mr Taylor diverted the Treasures opportunity to JJK in breach of his duties, whether JJK acted unlawfully in accepting information and advice from Mr Taylor, and whether the actions of Mr Taylor and JJK denied the plaintiffs the opportunity to acquire Treasures and earn the profits claimed. These questions will be answered on the causes of action as currently pleaded.
Result
[27]I decline the plaintiffs’ application for leave to amend their claim.
Gardiner J
Solicitors/Counsel:
C Walker KC, Barrister, Auckland Chapman Tripp, Auckland Bankside Chambers, Auckland
S Patel, Barrister, Auckland
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