The
High Court dismissed claims by Chinese importer Shanghai Neudorf that Zespri
was obliged to compensate it for fines totalling eight million dollars imposed
by Chinese authorities for deliberate underpayment of kiwifruit import duties. Shanghai Neudorf was the guilty party. Courts will not support litigants where their
claim is based on illegal or immoral behaviour.
Chinese authorities
raided Shanghai Neudorf’s offices in June 2011 investigating underpayment of
duty. In China, evasion of duties is
treated as a smuggling offence. The
company was convicted and fined. Its
managing director, Mr Liu, was also convicted and jailed. Zespri suspended kiwifruit exports to China while
the investigation was underway. It later
terminated its relationship with Shanghai Neudorf, appointing a new importer.
The court was told an
assessment of duty payable is not straightforward because the final price is
not known until product is sold in the Chinese market. Zespri and Shanghai Neudorf fixed a value for
imports, described as an Agreed Assessable Value. It was for Shanghai Neudorf to pay customs
duty based on this value. Adjustments
were made later on the basis of actual sales and a final liability for import
duties determined.
The Shanghai People’s
Court found that Shanghai Neudorf was liable for payment of import duties. It was the purchaser of Zespri’s product. Shanghai Neudorf was not selling on
consignment as Zespri’s agent.
After conviction,
Shanghai Neudorf sued without success in the New Zealand courts alleging Zespri
was liable to indemnify it for the $8 million fine. Justice Courtney said it could not
recover. The claim fell foul of the ex turpi causa rule: as a matter of
public policy the courts will not enforce any claim based on a wrongful act.
The amount of unpaid
duty totalled approximately $7.5 million.
Zespri is defending a separate claim by Shanghai Neudorf that Zespri is
liable for this amount.
Shanghai
Neuhof v. Zespri International – High Court (26.09.14)
14.044