Zespri Group Limited v Gao - [2020] NZHC 681

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-463-00094

[2020] NZHC 681

BETWEEN
ZESPRI GROUP LIMITED

Plaintiff

AND

HAOYU GAO

First Defendant

SMILING FACE LIMITED
Second Defendant

XIA XUE

Third Defendant

Hearing: 5 March 2020

Counsel:

L A O’Gorman and L C Sizer for plaintiff/respondent E St John and S Moore for defendants/applicants

Judgment:

3 April 2020

JUDGMENT OF KATZ J

[Stay application]

This judgment was delivered me on 3 April 2020 at 11.00 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

Solicitors: Buddle Findlay, Auckland
Yu Lawyers, Auckland

Counsel: E St John, Barrister, Auckland

S Moore, Barrister, Auckland

ZESPRI GROUP LIMITED v GAO & ORS [2020] NZHC 681

Introduction

[1] Zespri Group Limited (“Zespri”) controls all kiwifruit exports from New Zealand to countries other than Australia, on behalf of New Zealand growers.1 Following an extensive research programme, Zespri developed the G3 and G9 varieties of gold kiwifruit. The G3 variety (also known as “SunGold”) is particularly valuable, as it is a high-quality gold variety that is resistant to the kiwifruit vine disease Psa. Zespri holds the exclusive rights to commercialise G3 and G9 under the Plant Variety Rights Act 1987 (“PVR Act”).

[2] In a judgment delivered on 10 February 2020, I found that Mr Gao and his associated company, Smiling Face Limited, had breached Zespri’s exclusive rights under the PVR Act in relation to G3 and G9.2 I also found that Mr Gao and his wife, Ms Xue, had breached their G3 licence agreement with Zespri. I awarded significant damages to Zespri.

[3] The defendants/applicants have appealed the judgment. Pending resolution of their appeal, they seek a partial stay of execution.

[4] The applicants’ assets were “frozen” by this Court in September 2017. On 19 December 2017 the freezing order was varied to enable Mr Gao and Ms Xue to sell their kiwifruit orchard in Whakatane. The net proceeds of that sale were added to the frozen funds held in trust. In January 2020, the freezing order was again varied, this time to enable Mr Gao and Ms Xue to purchase a home in Hamilton (“the Hamilton property”) for just under $1 million. The Hamilton property is subject to the freezing order. In addition, a charging order has been registered against it. The balance of frozen funds remaining in trust after the property purchase was approximately
$650,000.

[5] The applicants now seek to stay execution of the judgment against the Hamilton property and also $75,000 of the frozen funds. The applicants wish to use

1 Pursuant to the Kiwifruit Industry Restructuring Act 1999.
2 Zespri Group Ltd v Gao [2020] NZHC 109.

that $75,000 to fund their appeal. They seek a variation to the freezing order to enable them to do that.

Legal principles

[6] The starting point is that a successful party is entitled to the fruits of its judgment. An appeal does not operate as a stay…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NZHC 681
Decision Date: 3 April 2020

CaseChat Overview and Summary

In the High Court of New Zealand, Zespri Group Limited brought an action against Haoyu Gao, Smiling Face Limited, and Xia Xue for their breach of Zespri's exclusive rights under the Plant Variety Rights Act 1987 concerning G3 and G9 varieties of gold kiwifruit. Katz J found in favour of Zespri and awarded significant damages. The defendants appealed the decision and applied for a stay of execution pending the outcome of the appeal. The applicants sought a stay of execution in relation to the Hamilton property and $75,000 of the frozen funds. The applicants wished to use the $75,000 to fund their appeal.

The Court considered whether a stay of execution should be granted in light of the relevant factors, including whether the appeal may be rendered nugatory by the lack of a stay, the bona fides of the appellants, whether the successful party would be injuriously affected by the stay, the effect on third parties, the novelty and importance of questions involved, the public interest in the proceeding, the overall balance of convenience, and the apparent strength of the appeal. The Court found that the appeal will not be rendered nugatory if a stay is not granted, the applicants are obviously bona fide in their wish to pursue an appeal and have arguable grounds of appeal, the appeal raises difficult and novel legal issues and must be assessed as having a reasonable prospect of success, and Zespri would be injuriously affected by a stay. However, the Court found that the overall interests of justice favour granting a stay of enforcement in respect of the Hamilton property, despite the fact that this will cause some prejudice to Zespri. The Court did not, however, require a stay of execution in respect of $75,000 of the funds currently subject to the freezing order, or a variation of the freezing order to enable the applicants to access those funds.

The Court ordered that execution of the judgment be stayed pending the appeal of the judgment, to the extent that no further steps are to be taken to enforce the judgment against the applicants’ property in Hamilton prior to the appeal being heard and determined. The stay application (and application to vary the freezing orders) is otherwise dismissed. Leave is reserved to Zespri to seek a review and/or variation of this order in the event that the applicants do not prosecute their appeal with due diligence. If costs issues cannot be resolved between counsel, then leave is reserved to file memoranda on costs. Any memorandum on behalf of Zespri is to be filed by 17 April 2020, and any memorandum on behalf of the applicants is to be filed by 1 May 2020. A costs decision will then be made on the papers.

Orders