Zespri Group has tipped a company it successfully sued three years ago into liquidation.
In 2020, the kiwifruit marketer was awarded almost $15 million in damages by the high court at Auckland after the firm’s SunGold variety was unlawfully taken to China and distributed to other growers by Smiling Face Limited, its director Haoyu Gao and his wife Xia Xue.
Zespri launched civil action against the couple and their company in 2018 after it was discovered two of its protected varieties were being propagated by Gao and his associates in China.
Nearly three years later, Zespri applied to the high court at Hamilton to liquidate Smiling Face.
The application was successful, with Rhys Cain and Larissa Logan of EY appointed liquidators.
However, following their appointment, they realised the company had been removed from the Companies Register “by error”. It was later reregistered.
In Cain and Logan’s first report, they said they had made attempts to contact the director and were yet to receive a response.
Gao’s registered address on the Companies Register was in Whakatāne.
On the flip side, they’d also requested information from Zespri, which was listed as the only creditor, but they were yet to respond as well.
The report noted they were yet to receive details of the amount owed to Zespri for preferential and unsecured creditor amounts.
In a ruling at the time, Justice Sarah Katz found that Gao had fraudulently offered to sell Zespri’s varieties as well as the right to licence them to parties in China – a right exclusively retained by Zespri.
That facilitated the planting of Zespri’s varieties in Chinese orchards and breached his contractual obligation to notify Zespri of any infringement he was aware of.
Katz’s decision said Gao was a “very unimpressive witness”, adding that “on his own evidence, Mr Gao revealed himself to be a person who lacks a moral compass and does not place a high value on honesty”.
On the other hand, she said she had no credibility issues with Zespri’s witnesses, although some of their evidence was hearsay.
The judge awarded damages of almost $15 million each against Gao and Smiling Face, and a further $10m against Xue, but ruled that the maximum to be paid was $15m.
After their appointment, Cain and Logan contacted Inland Revenue and relevant banks.
No secured assets were found and no GST or payroll balances were due after the accounts were closed in 2017.
No property was found in either Gao’s or Smiling Face’s name.
The only assets listed were cash in the bank of $919.44. Cain and Logan said they will be looking to identify and realise any assets.
At this stage, they couldn’t say what would be available, nor could they estimate when the liquidation would be complete.
Zespri was approached for comment.
Fruit quality issues have been haunting the industry over the past year, with Zespri’s chief executive recently telling growers the problem was worse than initially thought.
In a letter to growers last month, Daniel Mathieson said while demand for fruit remained as expected, they’d seen “further deterioration” in fruit quality on its vessels, particularly in the final shipments of its green varieties into Europe and Asia.
“These shipments arrived after our previous forecast calculations were completed, with fruit quality much worse than anticipated, driven by higher fruit loss than forecast – both onshore and offshore – and higher quality claims,” he said.
Initially, fruit loss in Europe was estimated to be about 7% for the last quarter of 2022, but it is now expected to be nearly 20%.
Zespri is looking at switching from the Unlisted Securities Exchange to the New Zealand stock exchange this year.
