No liability without proof the rival knew the shared information was confidential
The High Court refused to hold a company liable for a former director's alleged breaches of duty over a rival nappy brand.
In Rascals International Ltd v Taylor [2026] NZHC 2279, the court dismissed the plaintiff company's claims against two defendants and threw out a counterclaim.
The company, a nappy maker, bought out its two founders in early 2020. Their share sale agreement barred them from competing once they resigned as directors. The pair stopped working in the business on 1 May 2020 but stayed on as directors until 3 August 2020.
From July 2020, one founder gave informal advice to the directors of another company that was buying the struggling but well-known Treasures nappy brand, which later stocked those nappies in Countdown. He held no financial stake. The company accused him of breaking his directors' duties and the non-compete promise, and he settled before trial. The remaining claims targeted the buyer over those alleged breaches and a related company holding assets.
The court accepted that the founder still owed his directors' duties, including a duty of loyalty and a duty not to take the company's business opportunities, until his resignation took effect on 3 August 2020, plus a duty to keep its information confidential.
But the claims against the buyer failed. The court found that the founder passed on only a limited amount of confidential information, and the buyer's directors did not know, and did not deliberately ignore, that it was confidential or that he was still a director. The buyer barely used the information, which caused the company no harm. A separate claim that the buyer had dishonestly helped the breaches also failed.
A further claim asked the court to create a new type of legal action for knowingly bringing about a director's breaches. The court found that unnecessary and said it would have failed anyway, for the same lack of knowledge. A conspiracy claim failed too: with no unlawful conduct proven, the court found no intent to harm and no loss.
The claim against the asset-holding company also fell away. The court added that, even if it had found fault, the company could not show that the buyer caused any loss.
The buyer's counterclaim also failed. The buyer had sued after a company representative told Countdown that it had acted unlawfully. Its misleading-conduct claim was too late under a three-year limit, though the court said it would otherwise have succeeded. A claim over a damaging false statement failed because the representative honestly believed what he said.
