GAO v ZESPRI GROUP LIMITED [2021] NZCA 442

GAO v ZESPRI GROUP LIMITED [2021] NZCA 442 [7 September 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA123/2020[2021] NZCA 442BETWEEN HAOYU GAOFirst AppellantSMILING FACE LIMITEDSecond AppellantXIA XUEThird AppellantAND ZESPRI GROUP LIMITEDRespondentHearing: 27 and 28 April 2021Court: Kós P, Brown and Goddard JJCounsel: E St John, D L-C Liu and S Moore for AppellantsL A O'Gorman, L C Sizer and A N Birkinshaw for RespondentJudgment: 7 September 2021 at 12 pmJUDGMENT OF THE COURTA The appeal is allowed to the extent recorded in [144] of this judgment butis otherwise dismissed.B The orders at [202(b)–(c)] of the High Court judgment are quashed.C Orders that Mr Gao is to pay damages to Zespri in the sum of NZD12,081,150 in respect of the first cause of action and that Smiling Face isto pay damages to Zespri in the sum of NZD 12,081,150 in respect of thesecond cause of action are substituted.D There is no order for costs.____________________________________________________________________REASONS OF THE COURT(Given by Kós P)Table of ContentsPara NoThe Plant Variety Rights Act 1987 [6]BackgroundThe G3 golden kiwifruit varietyThe appellantsG3 goes to ChinaDealings with, and supply of budwood to, Mr ShuDealings with, and supply of budwood to, Mr YuDealings with Mr LiDealings with Mr YuanDealings with Mr YangIssues on appealIssue One: Hearsay — Did the Judge err in finding hearsaystatements made by Mr Shu were admissible?SubmissionsDiscussionConclusionIssue Two: Orchard sizes — Did the Judge err in assessing thesize of Mr Shu's orchards?SubmissionsDiscussion — general observationsDiscussion — orchard sizesConclusionIssue Three: Credibility — Did the Judge err in making adversecredibility findings?SubmissionsDiscussionConclusionIssue Four: Causation — Did the Judge err in finding the G3 andG9 varieties would not have reached Mr Shu in China but for MrGao's actions in New Zealand?SubmissionsDiscussionConclusionIssue Five: Extraterritoriality and jurisdiction — Did the Judgeerr in applying the PVR Act extraterritorially?SubmissionsDiscussionConclusionIssue Six: Remedy — Did the Judge err in fixing damages?SubmissionsDiscussionConclusionResult[12][13][17][19][26][34][36][38][40][41][42][44][47][54][55][61][65][73][78][79][81][83][88][89][90][91][96][97][103][106][123][124][129][132][143][145][1] Zespri Group Ltd holds exclusive rights to sell reproductive material of, and topropagate for commercial production, the G3 and G9 varieties of golden kiwifruitunder the Plant Variety Rights Act 1987.1 Mr Gao, his wife Ms Xue and their companySmiling Face Ltd grew G3 kiwifruit on an orchard in New Zealand under licence fromZespri.[2] Zespri alleged Mr Gao sold and then exported G3 and G9 to China from 2012onwards, purported to license those varieties for the whole of China, and engaged inconduct that breached Zespri's exclusive rights. It commenced this proceeding inJuly 2018 against the appellants, seeking an injunction against future infringementsand damages of NZD 31 million. The trial took place in November 2018.[3] In a judgment delivered in February 2020, Katz J held Zespri proved Mr Gaoand Smiling Face (a) supplied G3 and G9 to a Mr Shu (and purported to license himto exploit those varieties throughout the whole of China), (b) entered into a jointventure to exploit and sell G3 and G9 in China with a Mr Yu (including planting a 6 ha"demonstration park" in Xichang — in Sichuan, China — on which G3 supplied byMr Gao was planted), and (c) offered to sell G3 to a Mr Li, while also finding that(d) Mr Gao and Ms Xue breached the terms of their G3 Licence Agreements withZespri.2[4] The Judge awarded damages of NZD 14,894,100 against Mr Gao and SmilingFace each for (a) to (c) above (acts which infringed Zespri's statutory rights). She alsoawarded damages of NZD 10,824,300 against Mr Gao and Ms Xue jointly for (d)above (acts which infringed Zespri's contractual rights).3[5] This judgment addresses the appeal from that decision.1 In this judgment, the PVR Act. See s 17(1).2 Zespri Group Ltd v Gao [2020] NZHC 109 [High Court judgment] at [120]. See also the summaryof key factual findings at [192]–[195].3 At [171] and [187].The Plant Variety Rights Act 1987[6] There is no material challenge to the Judge's summary of the PVR Act and itseffect.4[7] The development of a new plant variety can be lengthy and expensive. Plantvariety rights (PVRs) provide plant breeders with the exclusive right to controlthe commercialisation of a new variety. This encourages investment in plant breedingand development.[8] The PVR Act was enacted in 1987, bringing New Zealand's plant variety rightsregime into line with the 1978 version of the International Convention forthe Protection of New Varieties of Plants.5 New Zealand has not yet implementedthe revised 1991 version of the Convention which enlarges PVRs. A bill to achievethat outcome was introduced to Parliament in May 2021.6 Under the relevant 1978version of the Convention, equivalent PVRs are granted in a large number of signatorycountries throughout the world.7 PVRs may be granted in respect of varieties of anykind of plant other than algae and bacteria.8 The word "variety" is used in the senseof a cultivar or cultivated variety of plant clone, hybrid, stock or line capable ofreproduction, and not in the sense of a botanical variety.9 PVRs will be granted ifthe variety is new, distinct, homogeneous and stable.10[9] Provisional protection applies from the day an application is made.11 A PVRlasts for 23 years from the date of grant of the PVR in the case of woody plants andtheir rootstocks (including kiwifruit varieties) and for 20 years for all other plantvarieties.124 At [16]–[22].5 International Convention for the Protection of New Varieties of Plants of 2 December 1961, asrevised at Geneva on 10 November 1972 and on 23 October 1978 1861 UNTS 281 (opened forsignature 23 October 1978, entered into force 8 November 1981) (in this judgment, the 1978UPOV Convention). The original 1961 Convention established the International Union forthe Protection of New Varieties of Plants (UPOV).6 Plant Variety Rights Bill 2021 (35-1).7 1978 UPOV Convention, art 3.8 PVR Act, s 2 (definition of "plant").9 Section 2 (definition of "variety").10 Section 10(2)(d).11 Section 9.12 Section 14(2).[10] The exclusive rights of a PVRs grantee are set out in s 17 of the PVR Act,which relevantly provides:17 Rights of grantees(1) Subject to section 19, a grantee shall have the exclusive right—(a) to produce for sale, and to sell, reproductive material ofthe variety concerned:(b) if that variety is a plant of a type specified bythe Governor-General by Order in Council for the purposes ofthis paragraph, to propagate that variety for the purposes ofthe commercial production of fruit, flowers, or other products,of that variety:(c) subject to any terms and conditions that grantee specifies, toauthorise any other person or persons to do any of the thingsdescribed in paragraph (a) or paragraph (b).(3) A grant may be assigned, mortgaged, or otherwise disposed of; andmay devolve by operation of law.(4) The rights of a grantee under a grant are proprietary rights, and theirinfringement shall be actionable accordingly; and in awardingdamages (including any exemplary damages) or granting any otherrelief, a court shall take into consideration—(a) any loss suffered or likely to be suffered by that grantee asa result of that infringement; and(b) any profits or other benefits derived by any other person fromthat infringement; and(c) the flagrancy of that infringement.(8) Where, in any proceedings for the infringement of the rights underthis section of a grantee, it is proved or admitted that an infringementwas committed but proved by the defendant that, at the time of thatinfringement, the defendant was not aware and had no reasonablegrounds for supposing that it was an infringement, the plaintiff shallnot be entitled under this section to any damages against the defendantin respect of that infringement, but shall be entitled instead toan account of profits in respect of that infringement.(9) Nothing in subsection (8) affects any entitlement of a grantee to anyrelief in respect of the infringement of that grantee's rights under thissection other than damages.By virtue of s 17(3) and (4), PVRs are a form of personal property and may be sold,licensed or assigned. The holder of a PVR may license others to produce fruit, flowersand other products for sale, and to sell propagating material of the protected plantvariety.13 Licensing is commonly rewarded by payment of royalties. The holder ofa PVR may, under s 17(4), bring civil action against anyone infringing these rights.[11] Vegetatively-propagating fruit-producing plants (such as kiwifruit) have beenspecified by Order in Council for the purposes of s 17(1)(b).14 Vegetative propagationis any form of asexual reproduction occurring in plants in which a new plant growsfrom a fragment of the parent plant, including the grafting and budding of fruit trees.Background[12] The background facts may be drawn from the judgment appealed. There arelimited challenges to factual findings, but where relevant we will identify themspecifically.The G3 golden kiwifruit variety[13] Zespri commercialised a variety of golden kiwifruit, Hort 16A, in the early2000s. It was highly successful, but susceptible to the Psa3 bacteria, a virulent strainof plant disease that destroys kiwifruit plants, and in particular Hort 16A. This Courthas looked at the effects of Psa3 on the New Zealand kiwifruit industry before, inAttorney-General v Strathboss Kiwifruit Ltd.15 As we observed there, from 2010 Psa3swept through kiwifruit orchards in the Bay of Plenty region. The disease could notbe eradicated. Vines were torn out. It took several years for the industry to re-establishitself.16[14] At the time of the Psa3 outbreak, Zespri had invested in research to identifynew kiwifruit varieties. As the Judge put it:1713 Section 19.14 Plant Variety Rights (Grantees' Rights) Order 1997, cl 2(a).15 Attorney-General v Strathboss Kiwifruit Ltd [2020] NZCA 98, [2020] 3 NZLR 247. See inparticular [1], [24]–[31] and [44]–[48].16 At [1].17 High Court judgment, above n 2, at [5].By mid-2010 more than 50,000 potential new varieties had been examined aspart of Zespri's research programme. More than 10,000 varieties madethe initial short list, 40 went to initial growing trials, four made it to on-orchardtrials and underwent on-orchard, storage, shipping and taste tests, and threereached the stage of the pre-commercial trials. Those three included the G3and G9 varieties.[15] Psa3 meant that the commercialisation of alternative disease-resistant varietieswas critical. Zespri accelerated the commercialisation of the G3 variety, which wastolerant to the Psa3 virus. G3 is currently the only proven, commercial varietyresistant to Psa3.18 In 2012 Zespri offered licences to its Hort16A growers to switchto G3. As the Judge observed, the recovery programme for the kiwifruit industrythrough G3 has been very successful. G3 is attractive to consumers and has achievedsignificant market premiums at much higher volumes. It has extended storagecharacteristics, is cost-effective and environmentally friendly to grow and pack.As the Judge stated, "it has driven grower returns and orchard values to recordlevels".19[16] Zespri holds exclusive rights to commercialised G3 and G9 under the PVR Act.In June 2009 it applied for registration of its rights for G3 and G9 in the United States,and in 2010 it applied for registration in other overseas countries, including China.All such rights have since been granted to Zespri.20 Relevantly, PVRs for G3 and G9in China have been granted, running for 20 years from 1 May 2016.The appellants[17] Shortly before Psa3 was gaining a foothold in New Zealand, the first and thirdappellants, Mr Gao and Ms Xue, established a kiwifruit contracting business, thesecond appellant, Smiling Face. It serviced kiwifruit orchards around Ōpōtiki. As theJudge observed, the disruption to the industry caused by the Psa3 outbreak put Mr Gaoand Ms Xue under significant financial pressure. But their business survived, and theymanaged to purchase their own kiwifruit orchard in 2013.2118 G9 has since been "decommercialised".19 High Court judgment, above n 2, at [7].20 At [8].21 At [10].[18] Licences to grow G3, and to sell the fruit produced, were granted to Mr Gaoand Ms Xue in July and September 2013 and July 2014.22G3 goes to China[19] In early 2016, Zespri became aware that G3 was being grown in the Hubei andSichuan areas of China. What happened next is explained in the judgment:23After hearing industry rumours that G3 and G9 were being planted in China,Zespri engaged private investigators. Based on information received fromthose investigators, in December 2016 Zespri sent two senior managers, ShaneMax and Sheila McCann Morrison, to China to make their own enquiries.They met with Shu Changqing (Mr Shu), a kiwifruit grower identified byZespri's private investigators. Mr Shu openly admitted that he was growingG3 and G9 on four orchards and took Mr Max and Ms McCann Morrison tosee three of those orchards. He declined to tell them, however, where he hadobtained G3 and G9 from.Zespri subsequently laid a complaint with the police, who executed searchwarrants at the premises of Mr Gao and Smiling Face. Zespri subsequentlyobtained copies of various documents seized by the police, pursuant toa request under the Official Information Act 1982. Zespri also later obtainedcourt orders for the cloning and search of Mr Gao's computer. Found on thatcomputer, and elsewhere, were a number of documents that Zespri alleges linkMr Gao and Smiling Face to commercial kiwifruit activities in Chinaincluding, in particular, in relation to the G3 and G9 varieties.[20] In a comprehensive judgment, the Judge made the following factual findings.Admissions made by Mr Gao[21] The Judge found Mr Gao had made a number of admissions of having acteddishonestly in relation to G3 and G9. Those admissions were "made in circumstanceswhere plausible denial was not an available option, in light of the contemporaneousdocuments".24[22] First, Mr Gao admitted to agreeing to a request from Mr Shu in August 2012to take G3 and G9 budwood to China with him, for delivery to Mr Shu.2522 At [173].23 At [11]–[12] (footnotes omitted). As we note subsequently, there is a challenge to the admissibilityof Mr Shu's statements. It is dealt with under Issue One.24 At [48].25 At [48(a)].[23] Secondly, Mr Gao admitted to signing two documents at the request of Mr Shuin October 2012. The first was what the Judge called the "False Licence Agreement",which (inter alia) purported to give Mr Shu full intellectual property rights to the G3and G9 varieties for the whole of China. The second was a receipt for the payment ofthe first instalment of the licence fee in the sum of RMB 1 million (NZD 200,000).Mr Gao's explanation for these documents was, in essence, that they were fraudulentdocuments aimed at deceiving prospective investors in Mr Shu's orchard intobelieving that Mr Shu had a valid licence to grow G3 and G9 on his orchard for whichhe had paid a (significant) licence fee.26[24] Thirdly, Mr Gao admitted to, in late November 2015, entering intoan agreement over WeChat (a communications app) with Mr Li, a kiwifruit growerbased in China, to sell him 1,000 G3 "sprouts" (budwood) for RMB 300,000(NZD 60,000). He subsequently told Mr Li that the budwood would be arriving inChina at the end of January 2016. Mr Li withdrew from the deal, however, once hediscovered (not from Mr Gao) that Mr Gao was not licensed to sell G3. The Judgenoted, not without irony, that Mr Gao was angry at Mr Li's withdrawal fromthe agreement and accused him of a lack of honesty.27[25] Fourthly, Mr Gao admitted to, in 2016, suggesting to an associate that he steala particular kiwifruit variety that he (Mr Gao) had provided to an orchard in China andgave him detailed instructions on where to find it.28Dealings with, and supply of budwood to, Mr Shu[26] The Judge was satisfied that Mr Gao agreed to supply G3 and G9 budwood toMr Shu in August 2012.29 Ultimately, that finding was not in dispute by the end ofthe trial, or before us on appeal.[27] However, there were challenges maintained against the Judge's reliance onstatements attributed to Mr Shu, on the basis these were inadmissible hearsay. We note26 At [48(b)].27 At [48(c)].28 At [48(d)].29 At [85(a)].the relevant statements at [29] and [48] below and we address that challenge underIssue One.[28] Secondly, the Judge found that Mr Gao exported G3 and G9 budwood fromNew Zealand in August 2012 and supplied it to Mr Shu in China. She rejectedMr Gao's claim in evidence that he reneged on his promise to do so. Mr Shu, a seniorfigure in the Hubei kiwifruit industry, had probably sought Mr Gao out specifically toobtain G3 or G9 budwood from him. Mr Gao was concerned about his future becauseof the Psa3 outbreak. The fact that Mr Shu reimbursed Mr Gao's airfare was consistentwith Mr Gao having performed the promise, as was the continuing businessrelationship between the two men.30[29] Thirdly, following Mr Gao's visit, Mr Shu resigned from his employment todevelop his own orchard interests. Mr Shu freely admitted growing G3 and G9 to twoof Zespri's witnesses, namely Mr Max and Ms McCann Morrison.31 The Judge foundthat following Mr Gao's supply of G3 and G9 budwood to Mr Shu in August 2012,Mr Shu facilitated the planting of those varieties at four different orchards,commencing with his family orchard at Chibi (1.3 ha) in 2012, and then spreading toXianning 1 (13.3 ha), Xianning 2 (33 ha) and Wuhan (120 ha).32 As at 2016 G3 andG9 was growing at all four orchards.33[30] Fourthly, although the False Licence Agreement was not genuine — and signedin October 2012 but post-dated to August 201234 — the Judge was satisfied thereference in it to Smiling Face or Mr Gao providing G3 and G9 budwood to Mr Shuin August 2012 was true. A related marketing proposal also supported the conclusionthat G3 and G9 were established on an orchard associated with Mr Shu followingMr Gao's August 2012 visit.3530 At [85(b)].31 At [85(b)].32 Importantly, these are the land areas, not crop areas. We consider the Judge's findings as to sizein Issue Two.33 High Court judgment, above n 2, at [85(h)–(i)].34 At [85(c)].35 At [85(b)]. The Judge found the purpose of the False Licence Agreement and receipt was todeceive prospective investors in Mr Shu's orchard into believing that the G3 and G9 varietiesbeing grown on that orchard were lawfully licensed, and that Mr Gao was aware of that purposewhen he signed the documents: at [85(d)].[31] Fifthly, what the Judge described as "somewhat panicked text messageexchanges" between Mr Shu and Mr Gao in November 2016 supported the conclusionMr Gao was the source of Mr Shu's unauthorised cultivation of Zespri's G3 and G9varieties.36[32] Sixthly, the Judge found Mr Gao received consideration for supplying the G3and G9 budwood to Mr Shu, and signing the False Licence Agreement and receipt, butshe could not determine the precise quantum of that consideration.37[33] Seventhly, the Judge rejected Mr Gao's claim that his actions were "innocent"because he did not know, prior to acquiring a G3 licence for his own orchard in 2013,that Zespri held the PVRs for G3 and G9. That was, the Judge said, implausible andinconsistent with the surreptitious nature of Mr Gao's conduct. Mr Gao was a kiwifruitcontractor working on a number of orchards during the height of the Psa3 crisis, whichZespri was proactively trying to manage. It was not credible that someone closelyinvolved in the kiwifruit industry at that time (or possibly any time) could havegenuinely believed that they were lawfully entitled to sell or export G3 and G9 toChina. And even after Mr Gao had signed his first G3 licence, he continued his effortsto sell G3 to growers in China, and to profit from its propagation in China.38 We agree,and Mr St John, for the appellants, did not seriously seek to persuade us otherwise.Dealings with, and supply of budwood to, Mr Yu[34] The Judge was satisfied that Mr Gao had entered into a joint venture withMr Yu in relation to the development of the Liangshan Yi orchard/demonstrationpark.39 She found Mr Gao invested funds in the joint venture, and rejected asimplausible his evidence that a sum of RMB 350,000 (NZD 70,000) advanced wasa loan. He was an investor with a proprietary interest in the joint venture —a "partner", as he described himself to Mr Li.40 The Liangshan Yi orchard is just over6.6 ha in size.4136 At [85(b)].37 At [85(g)].38 At [86].39 At [99(a)].40 At [99(b)].41 At [92].[35] Secondly, the Judge was satisfied that Mr Gao supplied G3 to the joint ventureto plant on the Liangshan Yi orchard. The Judge said the totality of the evidencesupported that conclusion, including:(a) The primary purpose of the joint venture was to introduce and developa Psa3-resistant kiwifruit variety for sale to third parties.42 That variety,the Judge found, was G3. The Judge rejected as incredible Mr Gao'sevidence that this could have been some other (unspecified) variety,possibly from a country other than New Zealand.43(b) The joint venture proceeded, including acquiring an interest in land.Mr Gao invested very significant funds in the joint venture, includingfunds borrowed from family members, which would have been unlikelyto occur unless Mr Gao knew that the joint venture had access tothe "raw material" (a Psa3-resistant kiwifruit variety) that it needed toachieve its objectives.44(c) Mr Gao's role as "technology officer" was to supply G3 budwood tothe joint venture, with the intention that it be subsequently produced,promoted and sold to third parties as a Psa-resistant kiwifruit variety.He was the only party based overseas and had ready access to G3through his work in New Zealand.45(d) Prior to Mr Gao entering into the Liangshan Yi joint venture he hadprovided G3 budwood to Mr Shu.46(e) Mr Gao admitted offering to provide G3 budwood to Mr Li, a year orso after investing in the joint venture, for the purposes of an orchardMr Li wished to establish. Mr Gao told Mr Li he had experience insuch matters due to his partnership in the Liangshan Yi orchard.4742 At [99(e)(i)].43 At [99(c)].44 At [99(e)(iii)].45 At [99(d)].46 At [99(e)(v)].47 At [99(e)(iv)].Dealings with Mr Li[36] The Judge found that Mr Gao had offered to sell G3 budwood to Mr Li,a Chinese kiwifruit grower, and had entered an agreement for the sale of G3budwood.48 Indeed, Mr Gao admitted doing so.[37] Mr Li however withdrew from the arrangement when he discovered Mr Gaolacked authority to sell G3 budwood to him.Dealings with Mr Yuan[38] The Judge found that Mr Gao and Mr Yuan entered into a joint ventureagreement in November 2015, when Mr Gao was visiting China, to exploit twoexclusive kiwifruit varieties supplied by Mr Gao, starting with a 6 ha area in Shanggao,China.49 The Judge "strongly suspect[ed]" the two exclusive kiwifruit varietiesMr Gao agreed to supply were G3 and G9.50 The agreement, which was in evidence,provided that in exchange Mr Gao was to receive a 30 per cent shareholding inthe venture.51[39] The Judge was unable on the evidence to determine whether supply in termsof the agreement proceeded.52 This allegation was therefore not relevant to the firstor second causes of actions or damages.53 We discuss it no further.Dealings with Mr Yang[40] On 5 January 2017 Mr Gao incorporated Jiangxi Jiashang AgricultureDevelopment Company Ltd in China which operated the Jiashang Agriculture orchard.When inspected shortly before trial, Zespri found no evidence of G3 or G9 growingin the Jiashang Agriculture orchard. The Judge accordingly found the evidence fellshort of establishing that Mr Gao has exploited or attempted to exploit G3 and G948 At [112].49 At [106].50 At [113].51 At [106(b)].52 At [113].53 At [120].through Jiashang Agriculture.54 Again, this meant the allegation was irrelevant tothe first and second causes of action and we need not address it further.55Issues on appeal[41] Six issues arise on appeal:(a) Issue One: Did the Judge err in finding hearsay statements made byMr Shu were admissible?(b) Issue Two: Did the Judge err in assessing the size of Mr Shu'sorchards?(c) Issue Three: Did the Judge err in making adverse credibility findings?(d) Issue Four: Did the Judge err in finding the G3 and G9 varieties wouldnot have reached Mr Shu in China but for Mr Gao's actions inNew Zealand?(e) Issue Five: Did the Judge err in applying the PVR Actextra-territorially?(f) Issue Six: Did the Judge err in fixing damages?Issue One: Hearsay — Did the Judge err in finding hearsay statements made byMr Shu were admissible?[42] The Judge held the statements made by Mr Shu in China to Mr Max andMs McCann Morrison were hearsay statements.56 Nonetheless, the Judge ruledthe statements admissible under s 18 of the Evidence Act 2006. The Judge consideredthe circumstances relating to the statements made by Mr Shu provide reasonableassurance they were reliable. Mr Shu had a capacity for dishonesty but he had nomotive to lie about growing G3 and G9 varieties and likely did not lie given he took54 At [118].55 At [120].56 Schedule to the High Court judgment, above n 2, [High Court judgment schedule] at [31].Mr Max and Ms McCann Morrison to his orchards.57 The hearsay statements werealso wholly consistent with other evidence in the case including photographs and videotaken by Mr Max and Ms McCann Morrison, the False Licence Agreement andmessages between Mr Shu and Mr Gao.58[43] The Judge also considered Mr Shu to be unavailable as a witness. The issuewas whether Mr Shu would not willingly give evidence for Zespri, as a resident inChina cannot be subpoenaed to give evidence in New Zealand.59 Mr Shu wasunwilling to be a witness for Zespri unless Zespri partnered with him in relation to hisG3 and G9 growing operation in China — something Zespri was unwilling to do.60Documentary evidence and Mr Gao's evidence in cross-examination demonstratedMr Shu's loyalty was to Mr Gao not Zespri.61Submissions[44] The appellants submit neither limb of the s 18 test was met. First, they submitthe Judge erred in finding the circumstances relating to the statements providereasonable assurance they are reliable. There are effectively no records ofthe meetings between Zespri and Mr Shu, nor any contemporaneous notes taken byMr Max or Ms McCann Morrison. There is no evidence as to the qualifications ornotes of the interpreter used to speak to Mr Shu who speaks no English.62 As Chineseis not a literal language, the statements cannot be reliable without evidence as tothe interpreter's ability. Zespri's failure to disclose documents that may exonerate orassist Mr Gao meant the Judge should have drawn a negative inference as tothe reliability of the statements Zespri sought to rely on.63 Finally, the appellantssubmit the Judge should have been cautious of the evidence of Zespri's witnesses astheir evidence is said to have been unfair and pejorative.57 At [33].58 At [34].59 At [37].60 At [38]–[39].61 At [40]–[43].62 We note there are in fact some (limited) handwritten notes recorded by the interpreter in Chinesewhich have been translated into English, along with the video referred to at [48] below.63 Citing Ithaca (Custodians) Ltd v Perry Corp [2004] 1 NZLR 731 (CA) at [155]; Payne v Parker[1976] 1 NSWLR 191 (CA) at 200–201; and Clayton v Clayton [2015] NZCA 30, [2015] 3 NZLR293 at [186].[45] Second, the appellants submit the Judge erred in finding Mr Shu unavailablein three respects. First, the Judge uncritically accepted Ms McCann Morrison'sevidence Mr Shu would not be a witness unless Zespri entered a commercialsettlement with him. Again, there is no record of any such discussion, nor ofthe translator's notes and qualifications. Next, the Judge erred in finding it open toand incumbent on the appellants to call Mr Shu if they wished to challenge his hearsaystatements. The Judge cited no authority for this proposition. She also assumedwrongly that Mr Shu was loyal to Mr Gao when Zespri appeared to have a relationshipwith him. Finally, that Mr Shu is a resident outside New Zealand does not make himnot compellable.64[46] For its part, Zespri submits the relevant statements (or some of them) are nothearsay at all. Rather, they revealed common knowledge or were offered either tosupport unintended inferences or for reasons other than to prove the truth of what wassaid.65 The discussions Mr Shu had (via a translator) with Mr Max and Ms McCannMorrison are said not to be assertions intended to be believed that Mr Shu was growingG3 or G9, but simply that he had technical skills in growing those varieties.They could, Ms O'Gorman submits, be "evidentially relevant and can be evidence ofa fact (i.e. having a tendency to prove he was growing G3 and G9), without being anintended assertion of that fact". The same was said to be true of his assertions aboutthe size and maturity of his orchards.Discussion[47] We reject each of these submissions. It is convenient to start with the last ofthem — that advanced by Zespri.[48] The exact statements concerned are set out in a schedule to the judgmentappealed. In essence it is that Mr Shu told Mr Max and Ms McCann Morrison that in2015 the Xianning 2 orchard had produced eight tonnes of G3 and G9, with a high yield.According to Mr Shu, the G9 was harvested in September and the G3 from early tomid-October, and the G3 and G9 plant material present at Xianning 2 had been obtained64 Citing Solicitor-General v X [2009] NZCA 476 at [35].65 Relying on R v Holtham [2008] 2 NZLR 758 (HC); and R v Twist [2011] EWCA Crim 1143, [2011]3 All ER 1055.by him from Xianning 1. Further, a video taken on a later visit with Mr Shu at his Wuhanorchard records a conversation between the translator, Ms Tang, and Mr Shu in whichMr Shu explains that he had planted around 700 m2 of G3 seedlings in a particular field.He also made statements that led Mr Max to believe the Wuhan orchard wasapproximately 120 ha in size.66[49] The Judge had no difficulty in concluding that these statements are hearsay innature. Nor do we. The statements were assertions by Mr Shu that he was growing G3(and G9). They were relied on by Zespri at trial to prove he was doing so, in support ofits claim that Mr Gao had supplied this material to Mr Shu. The Judge relied onthe statements to reach just that conclusion: see [29] above.[50] We turn now to the appellants' first argument, concerning the reliability ofthe statements. The requisite enquiry is a gate-keeping one: it is whether the evidence isreliable enough for a judge to consider and draw his or her own conclusions as to weight.67We do not think the Judge erred in her assessment as to this threshold reliabilityrequirement. The statements were made spontaneously in the presence of Mr Max andMs McCann Morrison (and their translator, Ms Tang), whom he knew represented Zespriand were investigating whether he was growing G3 and G9 without authorisation.As Ms McCann Morrison said in evidence:Mr Shu did not seem at all worried by this. He responded that he had a licenceto do so from New Zealand, which he had already shown to Zespri'sinvestigators.This was a document said to be substantially similar to the False Licence Agreement.While Mr Shu acted dishonestly in other respects, these were admissions made againstinterest. As the Judge observed:68 if he had wished to lie about this issue it is highly unlikely he would havebeen willing to take Mr Max and Ms McCann Morrison to visit his orchardsto view his growing operation first hand.66 High Court judgment schedule, above n 56, at [30]. Mr Shu's statement recorded at [30(b)] as tothe size of the Xianning 2 orchard appears to have been made to Zespri's investigators, rather thanto Mr Max or Ms McCann Morrison, and is inadmissible hearsay.67 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act and Analysis (4th ed,Thomson Reuters, Wellington, 2018) at [18.02].68 High Court judgment schedule, above n 56, at [33].Further, as the Judge observed, Mr Shu's statements were amply corroborated.She referred to the personal observations of Mr Max and Ms McCann Morrison,the photographs and video they took, the False License Agreement, the messagesexchanged between Mr Shu and Mr Gao, and Ms McCann Morrison's evidence ofthe context in which the orchard visits took place — namely that Mr Shu wanted to beZespri's "man in China" — which went unchallenged in cross-examination.69[51] Dealing now with more peripheral points made by the appellants as toreliability, the absence of contemporaneous documentation is a matter going to weight.The Judge expressly held that she had no concerns about the credibility of any ofthe witnesses called by Zespri.70 Finally, the medium of translation does not itselfclothe a translated statement with a hearsay character.71 In this case, we are not dealingwith double hearsay.72 We accept that in Tsang Chi Ming v Uvanna Pty Ltd (t/as NorthWest Immigration Services) the Federal Court of Australia considered proof of theaccuracy of the translation is necessary, but the Court also considered such proof mayarise in civil cases by inference.73 The provision for proof by inference gives scope,we think, to assess the need for proof of accuracy against the circumstances.We consider then that the accuracy of translation is a matter going to weight.The translated statements, as we noted earlier, were amply corroborated.This suggests the translation, at least on significant matters, was sufficiently accuratefor the Judge to have regard to Mr Shu's statements. There are limited records ofthe translation for Mr St John to assess or impugn, but we think it would suffice toshow material differences between the translated statements and extrinsic evidence.Apart from generalised complaints, Mr St John did not offer examples ofmistranslation, or potential mistranslation, undermining the admissibility ofthe hearsay statements of Mr Shu via Mr Max and Ms McCann Morrison.[52] Finally, we turn to unavailability. The Judge was entitled to accept, as she did,the evidence of Ms McCann Morrison on Mr Shu's commercial requirements to give69 At [34].70 High Court judgment, above n 2, at [45].71 Tsang Chi Ming v Uvanna Pty Ltd (t/as North West Immigration Services) (1996) 140 ALR 273(FCA) at 280.72 See, for example, Key v R [2010] NZCA 115.73 Tsang Chi Ming v Uvanna Pty Ltd (t/as North West Immigration Services), above n 71, at 280.evidence. That is the core complaint Mr St John makes, but Ms McCann Morrison'sevidence does not seem to us to have been seriously undermined. In any case, it wascorroborated by other evidence. Mr Gao admitted asking Mr Shu not to givedocumentary evidence to Zespri — an exchange evident in messages put in evidence.Mr Gao himself stated in evidence that Mr Shu did not want to come to New Zealand(but might give written evidence, which is beside the present point). As the Judgeobserved:74There is extensive evidence in this case that establishes that Mr Shu colludedwith Mr Gao to surreptitiously obtain G3 and G9 plant material fromNew Zealand and subsequently propagate that material in China, in the fullknowledge that he was not lawfully licensed to do so. Mr Shu created falsedocuments to mislead both investors and local officials as to the lawfulness ofwhat he was doing. Given this context, it is not surprising that Mr Shu wasunwilling to give evidence for Zespri (or provide it with copies of relevantdocuments) in the absence of a commercial agreement.[53] We agree. We are not persuaded the Judge erred in concluding Mr Shu wasunavailable as a witness. Mr Shu was "compellable" in the sense that word is used inthe Evidence Act.75 But the Judge was right to find he was unavailable, inasmuch ashe was outside New Zealand and it was not reasonably practicable for him to giveevidence.76 It was common ground he could not be the subject of testimonialcompulsion. Moreover, there was persuasive evidence that he was a co-conspiratorwith Mr Gao, had agreed with Mr Gao not to hand over documents to Zespri and hadadvised Ms McCann Morrison that he would not voluntarily give evidence without acommercial settlement or "partner" agreement. In this context the possibility thatremote hearing technology might be used is beside the point; the evidence ofMs McCann Morrison is sufficient to establish, on the balance of probabilities, thatMr Shu was unwilling to give evidence and, being beyond compulsion, therebyunavailable.Conclusion[54] The hearsay statements of Mr Shu were admissible in evidence at trial.74 High Court judgment schedule, above n 56, at [42].75 Evidence Act 2006, ss 16(2)(e) and 71. See Haunui v R [2020] NZSC 153 at [38]; andSolicitor-General v X, above n 64, at [35].76 Section 16(2)(b).Issue Two: Orchard sizes — Did the Judge err in assessing the size of Mr Shu'sorchards?[55] During their visits to the Chibi, Xianning 2 and Wuhan orchards, Mr Max andMs McCann Morrison took photographs which are in evidence. Also in evidence aresatellite images of the relevant areas with the locations of those photographssuperimposed.[56] The Judge noted the evidence of Mr Max and Ms McCann Morrison thatthe Chibi orchard is relatively small, at about 1.3 ha, based on their own physicalobservations, supported by photographic evidence. The Judge accepted that evidenceas reliable, noting Mr Max and Ms McCann Morrison were not challenged on it.77[57] The Judge went on to consider Mr Max and Ms McCann Morrison's evidencethat the first stage of the Xianning 2 orchard was 13.3 ha, based on a sign to that effectthey saw and photographed, and later had translated, at the orchard.78 The Judge alsonoted Mr Max and Ms McCann Morrison made their own physical observations ofthe Xianning 2 orchard and took photographs.79[58] As to the size of the Wuhan orchard, the Judge noted that Mr Shu told Mr Maxand Ms McCann Morrison that the Wuhan orchard was approximately 120 ha.This assessment was said to be consistent with the scale of the orchard as theyobserved it. Mr Max also said that Mr Shu was in fact quite emphatic about the sizeof the orchard, which was a source of pride for him.80[59] The Judge based the size of the Xianning 1 orchard on a statement in Mr Shu'sMarketing Proposal, which he sent to Mr Gao, that the size of his "DemonstrationPark" (which she understood to be Xianning 1) was 13.3 ha.81[60] The Judge accordingly assessed the size of Mr Shu's orchards on which G3and G9 were alleged to have been planted as follows:8277 High Court judgment, above n 2, at [74].78 At [79].79 At [81].80 At [84].81 At [85(i)], n 38.82 At [85(i)].(a) Chibi — 1.3 ha;(b) Xianning 1 — 13.3 ha;(c) Xianning 2 — 33 ha; and(d) Wuhan — 120 ha.Submissions[61] In their notice of appeal, the appellants objected to the Judge's findings as tothe land areas of the four orchards planted by Mr Shu, alleging they were based oninadmissible opinion evidence. At the hearing, the admissibility point was subsumedinto a broader challenge to the sufficiency of the evidence as to size, relevant as it isto the assessment of damages.83 The appellants submit neither Mr Max norMs McCann Morrison had relevant expertise so as to give an assessment of the size ofthe orchards they visited. Nor could their evidence as to size be admissible as layopinion evidence, neither having given any real evidence as to how they arrived atthe orchard sizes they asserted.[62] Secondly, as to the sufficiency of the broader evidence as to size, the appellantsemphasise that in what notes of the meetings with Mr Shu exist, the references to landareas do not match up with the accepted areas, and more fundamentally it is impossibleto tell to what they refer to. As to the satellite evidence relied on by Zespri in thisCourt, though in evidence, Zespri did not rely on it in the Court below and there is noevidence as to what the satellite images show.[63] For its part, Zespri submits the observations as to size of Mr Max andMs McCann Morrison are properly admissible either as fact evidence or as lay opinionevidence under s 24 of the Evidence Act. As to the former, size is visually noticeablerather than an inference drawn from facts. As to the latter, detailed factual accountsof size, as with distance, are difficult to convey; hence opinions as to size areadmissible. Further, the appellants did not raise this issue of admissibility at trial.83 See Issue Six below.[64] Zespri also submits that the photographs and satellite imagery of the orchardsites substantiate the evidence in their affidavits as to the size of the orchards.Zespri concedes that there is no scale or measurements on those satellite images butsubmits that can be added after the event. As to Xianning 1, Zespri concedes the sizeoffered in evidence by Mr Max is otherwise purely based on the inadmissible hearsayevidence of Zespri's investigators as Mr Max and Ms McCann Morrison did not visitthat orchard. As to Xianning 2, a translation of a photograph of a sign at the orchardreferring to the construction of a 13.3 ha demonstration site substantiates the sizealleged. As to the Wuhan orchard, that is further substantiated by the (admissible)hearsay statements of Mr Shu to Mr Max and Ms McCann Morrison.Discussion — general observations[65] We make six general observations before turning to the evidence relating toeach of Mr Shu's orchards.[66] First, we note that on the face of the judgment, as well as the evidence,the Judge's summary of the orchard sizes at [85] of her judgment is in error.The evidence she set out and on which she relies states the Xianning 2 orchard is13.3 ha, rather than 33 ha. Mr Max in his affidavit states the Xianning 1 orchard is 33ha. We think this error occurred due to an error elsewhere in Mr Max's affidavit wherehe appears erroneously to refer to Xianning 2 as being 33 ha. There is no suggestionthe two Xianning orchards are the same size. We proceed on the basis that the Judgetransposed the sizes of the Xianning 1 and 2 orchards in error.[67] Secondly, we think much of the difficulty in assessing the evidence as to sizestems from the manner in which the affidavit of Mr Max mixes personal observationswith the hearsay statements of Zespri's earlier investigators in China. The Judge ruledthese statements inadmissible where the challenged passages were clearly hearsay, butnoted that many statements were not expressly identified as being sourced fromZespri's investigators. There was insufficient factual foundation to supportan inference such statements originated from Zespri's investigators, rather thanMr Max's own personal observations.84 The Judge continued:85 there is admissible evidence as to the size of the various orchards (basedon the personal observations of Mr Max and Ms McCann Morrison anddocuments discovered by the defendants). It cannot therefore be inferred thattheir evidence as to the size of the orchards is based exclusively (or at all) onhearsay information conveyed by Zespri's investigators.[68] We accept this is the correct approach. On the face of Mr Max's evidence, attimes the obvious inference appears to be that the exact stated sizes of the orchards arederived from statements by Zespri's investigators as there is no explanation of howMr Max arrived at such a figure.86 But in the absence of evidence as to that inference,or cross-examination on this point, we do not find the exact figures themselves wouldbe inadmissible hearsay. Rather, we think issues as to the lack of explanation as tohow they are arrived at go to weight.[69] Thirdly, the admissibility objection does not seem to have been taken inthe High Court. Rather the focus was on the reliability of the evidence as to size.But that is not an answer. The onus remains on a plaintiff, in this case Zespri, to adduceadmissible evidence. We also note that the issue may not have arisen given it is, toan extent, parasitic on the Judge's hearsay rulings which were determined followingthe trial.[70] Fourthly, and turning to the admissibility issue proper, neither Mr Max norMs McCann Morrison are survey experts for relevant purposes and on appeal Zespridid not attempt to persuade us otherwise. We consider their evidence as to perceivedarea was lay opinion evidence admissible under s 24 of the Evidence Act (just as is layevidence of perceived colour, speed or distance). There may be limits as to howspecific a statement of measurement can be, without an explanation of how thatassessment was reached, before it can no longer properly be regarded as lay opinionevidence. But as will become evident, we need not address that to dispose of thisissue.84 High Court judgment schedule, above n 56, at [18].85 At [19].86 We focus here on Mr Max's evidence as Ms McCann's evidence was largely subsidiary to it.[71] Fifthly, and relatedly, the exact area of the orchards was not material to liability.Rather, area was relevant to assessment of damages applying the user principle, whichwe discuss under Issue Six. Ultimately, we are satisfied the remedy here does notdepend on exact measurement.87[72] Finally, we consider little weight, if any, can be given to the satellite imageryrelied on by Zespri. It contains no scale or means to ascertain the size of the orchards.The actual extent of the orchards is not demarcated and not always apparent. There islittle in this evidence that substantiates the general sizes of the orchards, let alonethe specific sizes alleged by Zespri.Discussion — orchard sizes[73] We turn then to consider the evidence as to the size of each of Mr Shu'sorchards in turn.[74] First, the Chibi orchard. Mr Max described the Chibi orchard on evidence as"relatively small" at 1.3 ha. No explanation as to how that figure was arrived at is inevidence, but we consider such a size — just 114 m2 — could be assessed byobservation by an average person. The photographic evidence corroborates thisassessment. We consider there to be sufficient evidence to establish the Chibi orchardis around 1.3 ha in size — exactness not being required for the assessment of damages.[75] Secondly, Xianning 1. As noted, Mr Max and Ms McCann Morrison did notvisit this site. They made no personal observation as to perceived size in respect ofthis orchard. The satellite imagery of this orchard in evidence only sets out its location,but does not show the boundaries, or for that matter the size, of the orchard. The Judgeappears to have avoided this issue by relying on the reference in Mr Shu's MarketingProposal to the "Demonstration Park" being 13.3 ha. As we explain at [66] above, anddiscuss further below, the evidence points to Xianning 2 being 13.3 ha. Mr Max's ownevidence was that Xianning 1 was 33 ha, but we put that to one side, he never havingvisited it. We consider it more likely that the "Demonstration Park" referred to isXianning 2. That would be consistent with the description on the sign at that orchard87 See [141] below.we discuss below. There is no evidence, then, to establish that the Xianning 1 orchardis 33 ha, or any other size. We return to this issue when we discuss the assessment ofdamages in Issue Six.[76] Thirdly, Xianning 2. Mr Max's only observation was that it was "moresubstantial" than the Chibi orchard. The translated sign photographed by Mr Max andMs McCann on their visit to Xianning 2 indicates that the orchard is 13.3 ha.That statement, if relied on for the truth of its contents as evidence the orchard is 13.3ha, is hearsay. We are not satisfied it is properly admissible as a business record unders 19 of the Evidence Act. But it is admissible as evidence of the mere fact Xianning 2was described as covering 13.3 ha (whether or not that was true). The fact of thatdescription suggests Xianning 2 is the "Demonstration Park" referred to in Mr Shu'sMarketing Proposal. The hearsay statement of Mr Shu in that document that the"Demonstration Park" is 13.3 ha is admissible to prove the truth of its contents.88Recourse to the satellite imagery is unnecessary. We are satisfied the Xianning 2orchard covers 13.3 ha.[77] Finally, the Wuhan orchard. Given we have found the statements by Mr Shuto Mr Max and Ms McCann Morrison were properly admissible, so too are hisstatements that the Wuhan orchard covered 120 ha. Mr Max's observations thatthe "scale" of the orchard was consistent with that figure are admissible lay opinionevidence, and corroborate Mr Shu's statements as the Judge rightly noted. We aresatisfied the Wuhan orchard covers 120 ha.Conclusion[78] The Judge erred in finding sufficient evidence proving the size of theXianning 1 orchard on the balance of probabilities. The Judge also appears to havemistakenly stated the Xianning 2 orchard covered 33 ha — we are satisfied it covered13.3 ha. Finally, the Judge did not err in her assessment of the size of the remaining88 Whether under the s 18 general hearsay exception or under s 19 as a business record, Mr Shu beingunavailable.orchards.89 It follows that Zespri had proved to the required standard that Mr Shu'sorchards totalled 134.6 ha, and Liangshan Yi a further 6.67 ha, totalling 141.3 ha.Issue Three: Credibility — Did the Judge err in making adverse credibilityfindings?[79] The Judge found Mr Gao a "very unimpressive witness": "On his ownevidence, [he] revealed himself to be a person who lacks a moral compass and doesnot place a high value on honesty".90 His evidence was described as "often evasiveand implausible".91 The Judge considered his evidence lacked credibility "on most ofthe contentious issues", although she went on to make specific credibility findings asrequired.92[80] The Judge considered Ms Xue intelligent and articulate. Her evidence wasforthright and credible on non-contentious issues, but often lacked credibility oncontentious issues.93Submissions[81] The appellants submit the Judge erred in finding Mr Gao lacked credibility.Mr Gao's admission to being involved in the False License Agreement demonstratedrather than undermined his credibility. The Judge did not give examples whereMr Gao's evidence was evasive or implausible. Some of the Judge's findings are saidto simply be unfair. In particular, it was plausible Mr Gao travelled to China to acquiremore knowledge on kiwifruit management — China is the leading supplier of kiwifruitand Mr Gao has limited English.[82] The appellants also submit the Judge erred in finding Ms Xue lackedcredibility. The Judge appeared to have wrongly confused Ms Xue, her qualificationsand her credibility with that of a different Ms Xu in a contemporaneous judgment.9489 For the avoidance of doubt, we note the size of the 6.67 ha Liangshan Yi orchard is not at issue,Mr Gao having confirmed its size in cross-examination.90 High Court judgment, above n 2, at [43].91 At [43].92 At [43].93 At [44].94 R v Xu [2018] NZHC 1433, [2018] 3 NZLR 626 at [159]–[160].The Judge took 15 months to deliver her judgment, suggesting she could notmeaningfully consider the credibility of the witnesses.Discussion[83] Credibility is a matter where considerable caution must be exercised beforereaching a different conclusion to the trial Judge.95 She saw the witnesses, and sawthe evidence play out before her. We did not. Something in the nature of a materialfailure of process or evidence analysis apparent from the written record is needed toovercome that customary caution an appellate court must exercise in assessing the trialjudge's credibility findings.[84] No such material failing is evident in the Judge's analysis. To the contrary,the dim view she took of the credibility of Mr Gao's evidence is amply justified on theevidence. We have set out at [21]–[25] above admissions the Judge found Mr Gaomade. These findings were not dissected and demolished on appeal. The onlychallenge to these findings was to the Judge's finding set out at [25] above. Mr St Johnsubmitted at the hearing that Mr Gao only told the associate where to find a particularkiwifruit variety but did not encourage him to steal it. That is a distinction without adifference. It also ignores the Judge's finding that Mr Gao "suggested" the associatesteal the variety. Mr Gao undoubtedly did so on the evidence. The only other specificcomplaint made concerned the Judge's finding that Mr Gao's claim he returned toChina to acquire more knowledge on kiwifruit management for his own orchardingactivities was implausible, given he was growing G3 and the best sources ofknowledge and cultivation of that variety lay in New Zealand.96 That finding wasentirely open to the Judge to make; it has not been shown to lack foundation.[85] Moreover, other aspects of Mr Gao's evidence corroborate the adverse findingssummarised at [79] above. That evidence demonstrated that, in addition tothe admitted acts summarised at [21]–[25] above, he had made false statements in hiscurriculum vitae and had destroyed evidence.95 Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13]; ANZBank New Zealand Ltd v Bushline Trustees Ltd [2020] NZSC 71, [2020] 1 NZLR 145 at [58]–[59]; and Sena v Police [2019] NZSC 55, [2019] 1 NZLR 575 at [38]–[40].96 High Court judgment, above n 2, at [63].[86] The Judge's error in relation to the identity of Ms Xue is of course concerning.The Judge appeared to have drawn on conclusions she reached in relation to anotherMs Xu in a criminal case she had heard around six months prior to this case, andattributed to Ms Xue the chemical engineering degree Ms Xu had.97 It is not clearwhy exactly the Judge made that error. But the particular error concerns a peripheraldetail. The Judge's findings on credibility of Ms Xue, which are far more positivethan in relation to Mr Gao, are not undermined by that error and were open to her tomake.[87] Finally, the delay here, while exceeding ordinary norms, was not such as to callin question the soundness of the judgment. Pointing to an isolated, peripheral error isinsufficient to call into question the soundness of the judgment appealed. It might beotherwise if frequent and repeated factual error could be pointed to, but that was notdone here. As Lord Scott observed in Cobham v Frett, if delay is to be relied on inattacking a judgment:98 a fair case must be shown for believing that the judgment contains errorsthat are probably, or even possibly, attributable to the delay. The appellatecourt must be satisfied that the judgment is not safe and that to allow it to standwould be unfair to the complainant.This is not such a case.Conclusion[88] The Judge's credibility findings were ones she was entitled to make.Issue Four: Causation — Did the Judge err in finding the G3 and G9 varietieswould not have reached Mr Shu in China but for Mr Gao's actions inNew Zealand?[89] The Judge held Mr Gao's offers to sell or provide G3 and G9 were "a necessaryprecursor" to the subsequent sales and/or provision of those varieties to Mr Shu andMr Yu in China. If Mr Gao had not taken steps in New Zealand to harvest or obtain97 Ms Xue held arts and education degrees.98 Cobham v Frett [2001] 1 WLR 1775 (PC) at 1783–1784. This statement has been adopted morerecently in Ramnarine v Ramnarine [2013] UKPC 27, [2014] 1 FLR 594 at [21]; and Idea ServicesLtd v Clark [2014] NZCA 97, (2014) 11 NZELR 619 at [11]–[12].G3 and G9 budwood, and then arrange its export, those varieties would never havereached Mr Shu and Mr Yu in China.99Submissions[90] The appellants submit the Judge erred in finding Mr Gao provided G3 or G9budwood to Mr Shu. Zespri lacked evidence of Mr Gao supplying the budwood toMr Shu. Mr Gao and Ms Xue did not grow G9. The False Licence Agreement andreceipt for the licence fee purportedly paid were said to be the only evidence Mr Gaosupplied the varieties. In contrast, Mr Shu may have obtained G3 and G9 budwoodwhen visiting New Zealand himself at an earlier date. Alternatively, G3 is grownunder licence in other countries and Mr Shu could have obtained it elsewhere.Discussion[91] We begin by noting that, self-evidently, the appellants only challengethe Judge's finding in relation to Mr Shu's obtaining of G3 and G9. The Judge'sfinding that Mr Yu obtained G3 and G9 from Mr Gao is therefore not at issue in thisappeal and we do not discuss it further.[92] Turning to Mr Gao's dealings with Mr Shu, we have set out the relevantfindings of the Judge at [26]–[33] above. We focus now on acts committed by the firstand second appellants in New Zealand.[93] First, in his own evidence Mr Gao acknowledged receiving (in New Zealand)a request by Mr Shu to bring G3 and G9 budwood to China when he travelled there,and agreeing to do so, before leaving New Zealand on 28 August 2012:Several days prior to my departure, [Mr] Shu through QQ told me that hewould like me to bring him some G3 and G9 budwood as a favour. As I hadalready purchased my airfare, and as I was in the process of looking forkiwifruit related work in China, to muddle through this, I told him thatI would. I was worried that if I had "torn the face" with him, he might nothost me, and not reimburse me for my airfare.99 High Court judgment, above n 2, at [135]. It should be noted that although the Judge referred to"China" generally in that paragraph of her judgment, it was common ground before us that Zespri'spleading was focused on Mr Shu and Mr Yu's enterprises: the four orchards listed at [29] aboveas well as the orchard referred to at [34] above.Mr Gao alleged he reneged on that agreement, but the Judge did not believe him.For the reasons noted at [28] above, we agree that was a conclusion amply justified onthe evidence.[94] Secondly, the Judge concluded that Mr Gao (in performance of the promisemade in New Zealand) then exported the G3 and G9 budwood from New Zealand andthen supplied it to Mr Shu. The False Licence Agreement and receipt are documentarytestimony to exactly that effect. At the hearing, Mr St John made much of the fact thatZespri could not locate the money Mr Shu is said to have paid Mr Gao, despite havingextensive access to his financial records. Given the ease with which money can beheld in secondary banking and non-banking locations, we do not think that is theknock-out blow Mr St John painted it as, particularly in the face of all the evidence tothe contrary. Again, we are satisfied these are conclusions justified on the evidence.[95] Thirdly, although there was documentary travel evidence of Mr Shu visitingNew Zealand for a week in late April 2012, there is no sound basis available to inferhe used that opportunity himself to smuggle G3 or G9 budwood out of New Zealand.If he had, why then ask Mr Gao to bring budwood four months later, in August 2012?Nor did Mr Gao assert that alternative narrative in evidence. On Mr Gao's account hetold Mr Shu he "forgot" to bring the budwood, but he did not suggest Mr Shu did notmind because he already had the budwood as a result of his visit four months earlier.And of course the False Licence Agreement attributed supply to Mr Gao orSmiling Face.100Conclusion[96] The Judge's conclusions summarised at [89] above were inferred properly fromthe evidence adduced at trial.Issue Five: Extraterritoriality and jurisdiction — Did the Judge err in applyingthe PVR Act extraterritorially?[97] The Judge held the following acts occurred in New Zealand:101100 See [30] above.101 High Court judgment, above n 2, at [58] and [123]–[124].(a) Mr Gao's offer to sell G3 and G9 budwood to Messrs Shu, Yu and Li;(b) Mr Gao's execution, on behalf of Smiling Face, of the False LicenceAgreement prepared by Mr Shu; and(c) in the case of the sales made to Messrs Shu and Yu, preparation of theG3 and G9 budwood for export, including growing and/or harvestingit, preparing it for transit, making and implementing shippingarrangements (or packing it in his luggage, if Mr Gao carried itpersonally).[98] Acceptance of the offers in (a), making of the offer (by Mr Shu) to enterthe False Licence Agreement in (b), and receipt of the G3 and G9 budwood in (c) (byMessrs Shu and Yu) all occurred in China.[99] The Judge held s 17 of the PVR Act gave Zespri these exclusive rights:102(a) to produce for sale, to offer to sell, and to sell G3 and G9 reproductivematerial;(b) to propagate G3 and G9 for the purposes of commercial production ofkiwifruit; and(c) to authorise any other person to do (a) or (b).[100] To the extent conferred by the PVR Act, these rights were territorial, ratherthan extraterritorial. That is, the PVR Act applied to things done, and people in,New Zealand and not elsewhere; the PVR Act did not expressly or impliedly conferextraterritorial rights.103[101] In an important section of her reasoning, the Judge considered the appellants'argument that Mr Gao's New Zealand-based actions, including purporting to authorise102 At [37].103 At [27]–[29], citing Poynter v Commerce Commission [2010] NZSC 38, [2010] 3 NZLR 300 at[36]–[37] and [41].Mr Shu to grow G3 and G9 in China, could not constitute an infringement of Zespri'srights under the PVR Act applying the reasoning of the United States Court of Appealsfor the Ninth Circuit in Subafilms v MGM-Pathe Communications Co.104 But theJudge rejected the Court of Appeals' reasoning.105[102] The Judge held that any acts within New Zealand that diminished Zespri'senjoyment of those exclusive rights would be infringing, even if forming "part ofa chain of conduct", some parts of which occurred outside of New Zealand.106That was not because subsequent acts in relation to G3 in China were governed byNew Zealand law, or within the jurisdiction of the New Zealand courts. Rather,liability arose from Mr Gao's conduct within New Zealand that diminished the valueof those exclusive rights conferred within New Zealand and recognised in overseasConvention countries, including China.107 That approach did not mean the High Courthad to rule on liability for acts within China; "that is entirely a matter for the Chinese[c]ourts".108 There was no suggestion by the appellants that China was a moreappropriate forum. Mr Gao and Ms Xue were domiciled in New Zealand, and subjectto its jurisdiction.109 But the effect of the Judge's reasoning was that execution ofthe False Licence Agreement by Mr Gao and Smiling Face in New Zealand, purportingto authorise Mr Shu to exploit G3 and G9 throughout China, breached Zespri's rightsunder the PVR Act because they diminished the value of those rights withinNew Zealand.110Submissions[103] Mr Liu (who argued this part of the appeal for the appellants) submitted, verycandidly, there was "no doubt" Zespri's Chinese PVRs had been infringed, and thatbased on the Judge's factual findings, "the appellants have acted quite appallingly".But those rights were not pleaded as the basis for the appellants' liability, and sothe claims should be dismissed. As it was common ground the PVR Act had no104 Subafilms Ltd v MGM-Pathe Communications Co 24 F 3d 1088 (9th Cir 1994) (en banc).105 High Court judgment, above n 2, at [32]–[36].106 At [38].107 At [38]. The same or similar rights might be recognised by China, but that was not material.108 At [39].109 At [40].110 See, for example, at [120(a)] and [136].extraterritorial effect, the rights enforceable by Zespri were solely those enjoyed byZespri in New Zealand. Those rights did not include the exclusive right to export G3and G9. This had four consequences.[104] First, the relevant PVRs did not create an exclusive right in Zespri to producefor sale, and to sell, G3 and G9 in overseas jurisdictions, propagate G3 and/or G9 forthe purposes of commercial production in overseas jurisdictions or authorise or licenceany other persons to do those things in overseas jurisdictions. Secondly, Zespri'spleaded claims related to its PVRs in New Zealand; there was no claim advanced basedon breach of PVRs in China. Thirdly, an act done in New Zealand purporting toauthorise commercial sale and propagation of G3 and G9 outside New Zealand —such as execution of the False Licence Agreement — cannot infringe Zespri'sNew Zealand PVRs. Fourthly, taking the three preceding points together the Judgecould not award damages based on a notional licence fee for plantation of the twovarieties in China. The infringing conduct "could only have infringed anddiminished the value of Zespri's Chinese [PVRs], which has not been pleaded".[105] For Zespri, Ms O'Gorman submitted her client's claim "was solely againstappellants within the personal jurisdiction of the High Court (New Zealand residentsand a New Zealand-registered company), for actions undertaken by them inNew Zealand to diminish the value of Zespri's exclusive rights in G3 and G9".The basis of the claim, and the judgment, Ms O'Gorman said, is the imposition ofliability for infringing acts that occurred in New Zealand. That is, those listed at [97]above. It followed that the claim did not relate, at least directly, to acts committed inChina: those listed at [98] above, and any ensuing propagation of G3 in that country.Discussion[106] We start with the precise legal nature of the rights conferred by the PVR Act.It is common ground that the PVR Act does not create rights extraterritorially. We aresatisfied that mutual concession is correct.[107] It follows the relevant rights conferred by s 17(1) all concern exclusive rightsto do things in New Zealand. That is, to "produce for sale [in New Zealand]", "to sell[in New Zealand]", "to propagate for commercial production [in New Zealand]",and to "authorise" others to do those things in New Zealand.111[108] Two considerations lead inevitably to that conclusion. The first isthe legislative text and context. The grant of the exclusive rights given in s 17 followsapplication to the Commissioner of Plant Variety Rights in New Zealand (ss 5–10).Section 12 makes clear that what is being sought is a "grant in New Zealand", althoughpriorities may coat-tail earlier equivalent applications made in other conventionjurisdictions. While the key provision for present purposes, s 17, is to an extent opaqueon the reach of the grant, s 17(5) and (6) — concerning importation into New Zealandof material protected by rights granted under the PVR Act — indicate it is the effecton rights held in New Zealand that constitute the infringing conduct.112 It follows weread s 17(1)(a) and (b) in the way set out in the preceding paragraph: that is, it createsexclusive rights to sell, and to propagate commercially, in New Zealand. Importantly,in s 17(1)(c) therefore it creates an exclusive right to authorise others to do just thatand no more: to sell, and to propagate commercially, in New Zealand.[109] Context supports the inference of the PVR Act being limited territorially, thatcontext being the 1978 UPOV Convention. Article 11 provides for serial registrationin different states: a breeder may choose the member state in which he or she files hisor her first application for protection, and thereafter apply for protection in othermember states. Article 12 provides the breeder enjoys (limited) rights of priority inother member states subject to compliance with certain procedural requirements andtime frames.113 But importantly, art 11(3) states:(3) The protection applied for in different member States of the Union bynatural or legal persons entitled to benefit under this Convention shall beindependent of the protection obtained for the same variety in other Stateswhether or not such States are members of the Union.In other words, that PVRs are granted in a variety in one member state does notautomatically give PVRs in that variety in another member state, or necessarily mean111 The latter assumes some importance when we come shortly to consider the Judge's finding thatexecution of the False Licence Agreement (in New Zealand) purportedly authorising exploitationof G3 and G9 by Mr Shu (in China) infringed Zespri's rights under the PVR Act.112 That conclusion concerns the scope of protected rights. It does not mean that conduct offshorecannot infringe rights within New Zealand and be actionable where jurisdiction exists.113 Reflected in the PVR Act, ss 12 and 13.that PVRs will be granted in that variety upon an application in that member state.The 1978 UPOV Convention, then, establishes a framework of similar but independentterritorial PVRs regimes which are linked only through (limited) rights of priority ofregistration. This context, to which the PVR Act was to give effect, is consistent withthe PVR Act having no extraterritorial effect: if a breeder wishes to protect PVRs ina foreign jurisdiction, an application in that jurisdiction with the benefit of rights ofpriority is the contemplated avenue.[110] Secondly, the presumptive position at common law is that a statute hasterritorial-only effect unless extraterritorial reach is provided for expressly or bynecessary implication.114 It follows, the Supreme Court said in Poynter v CommerceCommission, that an enactment "will generally apply to things done and people in theterritory to which it extends, and no further".115 In Poynter the legislation provided,inter alia, that:116This Act extends to the engaging in conduct outside New Zealand by anyperson resident or carrying on business in New Zealand to the extent that suchconduct affects a market in New Zealand.Mr Poynter, an Australian resident, was said to have been party to an unlawfulanticompetitive arrangement to fix the price of timber preservatives supplied inNew Zealand. Any material acts on his part occurred in Australia. The Supreme Courtupheld his protest to jurisdiction: the provision cited above was an exhaustivestatement of the intended extraterritorial effect of the Act.117 It had been amendediteratively since original enactment.118 Mr Poynter did not fall within it.[111] In this appeal, neither express words nor necessary implication suggestthe PVR Act has extraterritorial reach. Rather, words and context compel the oppositeconclusion.[112] We turn now to what was pleaded. The first and second causes of action werepleaded on the basis that Mr Gao and Smiling Face breached Zespri's PVR rights114 Poynter v Commerce Commission, above n 103, at [15], [36]–[45] and [78].115 At [36].116 Commerce Act 1986, s 4(1).117 Poynter v Commerce Commission, above n 103, at [15] and [62].118 At [17] and [40].under the PVR Act by "offering to sell, selling and/or supplying reproductive materialof those varieties for commercial purposes". Zespri's closing submissions at trialwere, inter alia, that entry into the False Licence Agreement undermined Zespri'sexclusive right to sell G3 and G9 and to "authorise the propagation of the G3 and G9varieties for the purposes of commercial production of kiwifruit". It is that submissionthat produced the Judge's conclusion that Mr Gao's (and Smiling Face's) actions inpurporting to authorise Mr Shu to grow G3 and G9 in China constitutedan infringement of Zespri's rights under the PVR Act.119[113] That conclusion is not one with which we can agree.[114] Ms O'Gorman, attempting to uphold this part of the judgment, asserts thatZespri's claim was confined to those acts listed at [97] above, and that none of thoseacts gave extraterritorial effect to the PVR Act. But that submission does not justifythe Judge's conclusion — one Zespri had invited her to make — that entry into theFalse Licence Agreement (in New Zealand), thereby purporting to authorise Mr Shuto grow G3 and G9 (in China), constituted an infringement of Zespri's rights under thePVR Act.[115] Smiling Face assumed two essential obligations under the False LicenceAgreement. The first was the physical supply of "plant materials" (being G3 and G9budwood) to Mr Shu in China. In fact, it may be doubted that part of the agreementwas operative: entry into the agreement (which was backdated) post-dated supply ofbudwood by Mr Gao to Mr Shu in August 2012.120 The Judge made no finding of anyother supply of protected material to Mr Shu. But there can be no doubt thatobligation, if operative, would have involved a sale of protected material inNew Zealand, and therefore a breach of s 17(1)(a) of the PVR Act.[116] The second obligation assumed was the purported transfer to Mr Shu of PVRsin those varieties, permanently and throughout China. In consideration, Smiling Facewas to receive a fee of RMB 10 million (equivalent to NZD 2 million), ten per cent tobe paid immediately and the balance out of profits earned by Mr Shu. That obligation119 See [101] above.120 See [28] and [30] above.involves the purported authorisation of acts in China, including propagation. Were thepurported authorisation of propagation of these varieties in New Zealand, it would fallwithin s 17(1)(c). But because it relates to China, it does not, for the reasons givenabove at [108]. It follows that to the extent the Judge found the signing of the FalseLicence Agreement was an infringing act separate to the sale of G3, that finding wasincorrect.121[117] We turn now to the decision of the United States Court of Appeals for theNinth Circuit in Subafilms Ltd v MGM-Pathe Communications Co.122 In that casethe defendant, a United States corporation, had without licence of its own purportedto authorise licensees abroad to distribute videocassettes of the 1968 film,Yellow Submarine.123 The Court of Appeals held the United States Copyright Act,lacking extraterritorial effect, did not prohibit "assertedly infringing conduct [that]consists solely of the authorization within the territorial boundaries of theUnited States of acts that occur entirely abroad".124 Considering academic criticismof that decision, the Judge declined to apply it in the case on appeal.125 We take adifferent view, however. Rather, we find the scheme of the PVR Act is consistent withthe underlying premise in the Subafilms decision: the protected, exclusive rightsgranted by the PVR Act are confined to New Zealand.126 That, ultimately, is thelimited legislative scheme adopted in the PVR Act as it stands now — a consequenceof the UPOV Convention, based as it is on separate state-based registrations of rights.[118] A hypothetical example illustrates the difficulty with Zespri's argument thatauthorisation in New Zealand of propagation in China breaches Zespri's New ZealandPVRs. Suppose a New Zealand company, A, develops a new variety for which itobtains New Zealand PVRs registration. The rights are also registered in othercountries, including the United States, as contemplated by the 1978 UPOVConvention. A wishes to exploit the new variety in New Zealand, but not in121 High Court judgment, above n 2, at [120].122 Subafilms Ltd v MGM-Pathe Communications Co, above n 104.123 In which, apparently, the Beatles travel in a yellow submarine to Pepperland to free it fromthe music-hating Blue Meanies.124 Subafilms Ltd v MGM-Pathe Communications Co, above n 104, at 1089.125 High Court judgment, above n 2, at [34]–[36], relying on the critical analysis by Paul Goldsteinand P Bernt Hugenholtz (eds) International Copyright: Principles, Laws and Practice (3rd ed,Oxford University Press, New York, 2013) at 129.126 See [107]–[111] above.the United States. It sells the United States PVRs to another New Zealand company,B. A also supplies reproductive material to B in New Zealand, which B exports underlicence to the United States. B enters into licensing agreements with United Statesgrowers and agrees to sell reproductive material to them. B negotiates and concludesthose agreements from its headquarters in New Zealand. Doing so of course does notinfringe A's New Zealand PVRs.[119] Now suppose that C, another New Zealand company, purports to grant alicence to cultivate the new variety to a grower in the United States. A has nocomplaint about C's conduct, because its New Zealand PVRs are not infringed.That remains the case even if C's conduct all occurred in New Zealand. That alsoremains the case even if C's conduct causes loss to A, for example because A is entitledto a share of the revenue that B earns from exploitation of the new variety in the UnitedStates. The lawfulness of C's conduct turns on whether it breaches B's United StatesPVRs; the New Zealand PVRs are irrelevant. If C has breached B's United StatesPVRs, B will have a claim against C; A will not. B will likely be able to bring thatclaim before a New Zealand court, which will have personal jurisdiction over C(a New Zealand company), and B can plead and prove its rights under United Stateslaw, as well as the infringement of those rights.[120] Returning to the present case, the purported authorisation by the appellants ofconduct in China does not infringe Zespri's New Zealand PVRs. Zespri might havebeen able to bring a claim in New Zealand in reliance on its rights under Chinese law(though we did not have any evidence before us about the scope of those rights, orthe consequences of their infringement). But it did not do so.[121] Finally, for reasons we will consider in further detail in the next section of thisjudgment, the fact that the conduct in this case has an international dimension,including the objective of propagating G3 and G9 in China, does not mean the pleadedunlawful acts undertaken in New Zealand in breach of s 17(1)(a) are not actionable.The acts listed at [97(a) and (c)] above are acts committed in New Zealand in breachof the exclusive right of Zespri to sell its protected varieties, whether by way of exportor otherwise. Although the Bill currently before Parliament enlarges the scope ofrestricted acts to include "exporting", neither of those acts were gratuitous or weredone solely to enable the appellants to make use of G3 and G9 outside New Zealandthemselves.127 Each involved "sale" to a third party in the sense defined in s 2 of thePVR Act: "any disposition for valuable consideration and any offer for sale".In relation to Mr Yu, that consideration appears to have been an interest in theLiangshan Yi orchard joint venture.[122] We exclude from this analysis, however, entry into the False LicenceAgreement — the act listed at [97(b)]. The act of purporting to authorise exploitationof G3 and G9 in China does not fall within s 17(1)(c). Furthermore, we are notpersuaded the remaining sale component of that agreement had operative effect in fact.Conclusion[123] We conclude the Judge erred in holding entry into the False Licence Agreementinfringed the PVR Act. That apart, she did not err in her assessment of the territorialeffect of the PVR Act.Issue Six: Remedy — Did the Judge err in fixing damages?[124] The Judge accepted Zespri's submission that, once infringing conduct inNew Zealand was proven, it was entitled to full compensatory damages. That includeddamages "flowing from exploitation abroad of the domestic acts of infringementcommitted by Mr Gao and Smiling Face".128 The Judge held that was consistent withthis Court's approach in New Zealand National Party v Eight Mile Style, LLC, as wellas United States authority.129[125] Secondly, when assessing damages, the Judge considered the starting point wasthe mandatory considerations in s 17(4):130(4) The rights of a grantee under a grant are proprietary rights, and theirinfringement shall be actionable accordingly; and in awarding127 Plant Variety Rights Bill, cl 14(3)(d).128 High Court judgment, above n 2, at [150].129 At [151], referring to New Zealand National Party v Eight Mile Style, LLC [2018] NZCA 596,[2019] 2 NZLR 352; WesternGeco LLC v Ion Geophysical Corp 585 US _ (2018), 138 S Ct 2129(2018); and Los Angeles News Service v Reuters Television International Ltd 149 F 3d 987 (9thCir 1998).130 At [153].damages (including any exemplary damages) or granting any otherrelief, a Court shall take into consideration –(a) any loss suffered or likely to be suffered by that grantee asa result of that infringement; and(b) any profits or other benefits derived by any other person fromthat infringement; and(c) the flagrancy of that infringement.There was insufficient evidence to quantify the profits derived by the appellants, butthey would be "greatly eclipsed by the loss/damage to Zespri".131 The appellants'conduct was "premeditated, calculated and flagrant".132 Zespri's loss was also difficultto assess. The Judge said it was "simply not possible to quantify on a traditionalbasis".133 Relying on this Court's Eight Mile Style decision, damages calculated ona user principle, based on a notional royalty, were appropriate here.134 To quantifydamages the Judge applied the competitively-established licence fee to propagate G3in New Zealand (NZD 171,000 per ha) to the 174.2 ha Zespri had shown G3 and G9was growing on in China.135 That totalled NZD 29,788,200.136[126] Thirdly, s 17(4) required consideration of Zespri's likely future losses also.G3 plantings could easily expand throughout and beyond the current orchards, butthe Judge considered Zespri should reasonably be expected to take action to preventthe proliferation of G3 in China under the equivalent Chinese PVRs legislation.137[127] Fourthly, the Judge then opted to reduce the initial damages amount by 50 percent to account for the fact that only a portion of each orchard was planted in G3 orG9 and that Zespri could take action to enforce its PVRs in China to mitigate futureloss.138 That gave a final damages total of NZD 14,894,100.139131 At [154].132 At [155].133 At [156].134 At [158] and [160], citing New Zealand National Party v Eight Mile Style, LLC, above n 129.135 At [161]–[166]. These were the four orchards associated with Mr Shu and the Liangshan Yiorchard. See [73]–[78] above. We have found the proven area to be 141.3 ha: see [78] above.136 At [170].137 At [168]–[169].138 At [170].139 At [171].[128] Finally, the Judge held Mr Gao's breach of the G3 Licence Agreements causedMr Yu to receive G3 budwood which was planted in the Liangshan Yi orchard andprevented Zespri having the opportunity to take steps to prevent Mr Shu planting G3at the Wuhan orchard.140 The Judge also assessed damages for breach of the G3Licence Agreements via the user principle — but applied to the smaller area of126.6 ha and again discounted by 50 per cent. The result was damages ofNZD 10,824,300.141 Ms Xue was held jointly liable with Mr Gao for thosedamages.142Submissions[129] The appellants challenge application of the user principle, and a notionallicence fee, to assess damages for the infringement of Zespri's New Zealand PVRs incircumstances where the propagation notionally licensed is in China. They submitthe Judge misapplied the reasoning of the United States Supreme Court inWesternGeco LLC v Ion Geophysical Corp.143 There the defendant's domestic patentinfringement had injured the claimant domestically. Here, the appellants submit,the Judge failed to consider whether Zespri actually suffered or was likely to sufferthe pleaded loss, which was in effect based on the unpleaded diminution of the valueof PVRs in China.[130] Secondly, and assuming their conduct falls within s 17 of the PVR Act,the appellants submit the Judge should have taken an "ordinary and pragmatic"approach to damages, rather than applying the user principle. Zespri did notdemonstrate actual loss, and the appellants did not benefit from their actions.There was no evidence the False Licence Agreement was given effect to. The Judgewas wrong to find it implausible the licence fee went unpaid. The Judge ought to havefollowed the approach of the High Court in Cropmark Seeds Ltd v Winchester140 At [181]–[182]. The G3 Licence Agreements (July and September 2013 and July 2014) post-datedthe sale of protected budwood to Mr Shu (August 2012).141 At [186]–[187].142 At [180].143 WesternGeco LLC v Ion Geophysical Corp, above n 129.International (NZ) Ltd and this Court in Winchester International (NZ) Ltd vCropmark Seeds Ltd and awarded (nominal) exemplary damages only.144[131] Thirdly, the appellants submit damages under the G3 Licence Agreementsought to be nominal only, for reasons similar to those in the preceding paragraph.Further, the licence agreement was limited to the G3 variety and there was no evidenceas to the proportion of the orchards planted with G3. Any breach of the reportingclause could not cause loss as Zespri became aware of Mr Shu's activities in 2016 inany event but did nothing to stop his activities.Discussion[132] We are unpersuaded the Judge erred in principle in fixing damages. We makesix points.[133] First, s 17(4) offers a broad suite of remedies — compensatory, exemplary andcoercive — comparable with those ordinarily available at common law in respondingto economic torts (of which PVRs infringement is one). It may usefully be comparedto the more unbundled ss 120–122 of the Copyright Act 1994. Exemplary (or"additional") damages stand in their own realm. Although amply justifiable given theappellants' conduct — as their counsel acknowledged — they are not in issue in thisappeal. Account of profits, a restitutionary remedy, is mandated where PVRsinfringement is innocent: s 17(8). Innocent this conduct was not, and the appellants'profit, if any, is unproven.[134] Secondly, the remedy granted to Zespri — compensatory damages fixed bythe user principle — lies within s 17(4) and is normal where there is an expropriationand use of intellectual property rights, and either the plaintiff's loss or the defendant'sprofit is elusive.145 The former we have already noted; the latter is conceded by Zespri:demand exceeds supply and it cannot point to any diversion of sales.146 Nonetheless,144 Cropmark Seeds Ltd v Winchester International (NZ) Ltd HC Timaru CIV-2003-476-8,28 September 2004; and Winchester International (NZ) Ltd v Cropmark Seeds Ltd CA226/04,5 December 2005.145 See, for example New Zealand National Party v Eight Mile Style, LLC, above n 129; and NapierTool & Die Ltd v Oraka Technologies Ltd [2016] NZCA 554, [2017] 2 NZLR 611 at [74].146 High Court judgment, above n 2, at [139].the appellants' expropriation of its rights disrupt its global strategy for the exploitationof its monopoly PVRs in G3 and exposes it to potentially uncontrollable competitionas the material sold by the appellants proliferates in offshore jurisdictions.The underlying rationale of the user principle is that damages should compensate theright-holder for the unilateral expropriation of the value inherent in the right to controlexploitation.147 As the United Kingdom Supreme Court put it in One Step (Support)Ltd v Morris-Garner, the defendant "takes something for nothing, for which the ownerwas entitled to require payment".148 In requiring payment for the expropriated right,the remedy serves a compensatory function, essentially putting the plaintiff in theposition they would have been in had the wrong — the expropriation and use — notbeen committed. It is immaterial that the plaintiff would not willingly have licensedthe defendant, a point made tellingly by Lord Shaw's famous equine example inWatson, Laidlaw & Co Ltd v Pott, Cassels & Williamson:149If A, being a liveryman, keeps his horse standing idle in the stable, and B,against his wish or without his knowledge, rides or drives it out, it is no answerto A for B to say: "Against what loss do you want to be restored? I restorethe horse. There is no loss. The horse is none the worse; it is the better forthe exercise."As Lord Shaw continued, absent a remedy (in the example, the price of hire ofthe horse) "the law, when appealed to, would be standing by and allowing the invaderor abstracter to go free".150 A similar paradox was pointed to by Earl Halsbury LC inThe Mediana, a collision case involving the plaintiff's lightship and in which theplaintiff harbour board happened conveniently to have a spare such vessel available toit:151Supposing a person took away a chair out of my room and kept it for twelvemonths, could anybody say you had a right to diminish the damages byshewing that I did not usually sit in that chair, or that there were plenty ofother chairs in the room?147 New Zealand National Party v Eight Mile Style, LLC, above n 129, at [26]–[28]; and General Tire& Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819 (HL) at 824–825 per LordWilberforce.148 One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, [2019] AC 649 at [95(1)].149 Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson 1914 SC (HL) 18 at 31, quoted by LordReed in One Step (Support) Ltd v Morris-Garner, above n 148, at [28].150 Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson, above n 149, at 32.151 The Mediana [1900] AC 113 (HL) at 117.[135] Thirdly, the user principle presumes a hypothetical negotiation betweenthe parties. It assumes a degree of reason on both sides, and the wherewithal to payon the part of the defendant. As Lord Wilberforce observed in General Tire & RubberCo v Firestone Tyre & Rubber Co Ltd:152In some cases it is not possible to prove either (as in 1) that there is a normalrate of profit, or (as in 2) that there is a normal, or established, licence royalty.Yet clearly damages must be assessed. In such cases it is for the plaintiff toadduce evidence which will guide the court. This evidence may consist of thepractice, as regards royalty, in the relevant trade or in analogous trades;perhaps of expert opinion expressed in publications or in the witness box;possibly of the profitability of the invention; and of any other factor on whichthe judge can decide the measure of loss. Since evidence of this kind is in itsnature general and also probably hypothetical, it is unlikely to be of relevance,or if relevant of weight, in the face of the more concrete and direct type ofevidence referred to under 2. But there is no rule of law which preventsthe court, even when it has evidence of licensing practice, from taking thesemore general considerations into account. The ultimate process is one ofjudicial estimation of the available indications.Further to the very last point there made by Lord Wilberforce, this Court in Eight MileStyle approved the observations of the authors of Copinger and Skone James onCopyright that in applying the user principle to fix a notional licence fee by way ofcompensatory damages, the court may have to call into play "inference, conjectureand the like", and apply "a sound imagination and the practice of the broad axe".153[136] Fourthly, we consider the Judge was correct to look for comparable evidenceof licence fees for the propagation of G3 in New Zealand. The infringements here arethe acts listed at [97(a) and (c)] above. These are infringements of Zespri'sNew Zealand PVRs, as we have noted already.154 Had the budwood been sold toMessrs Shu and Yu for propagation in New Zealand, damages referable to the relevantdomestic licensing regime would surely have been assessed. The proposition that theyare not however payable merely because the budwood was immediately exported doesnot appeal. Indeed, it has no more attraction than the arguments made (notionally) by152 General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd, above n 147, at 826.153 New Zealand National Party v Eight Mile Style, LLC, above n 129, at [29], quoting Gillian Davies,Nicholas Caddick and Gwilym Harbottle (eds) Copinger and Skone James on Copyright (17th ed,Sweet & Maxwell, London, 2016) vol 1 at [21–292]. See also Andrew Burrows Remedies forTorts, Breach of Contract & Equitable Wrongs (4th ed, Oxford University Press, Oxford, 2019)at 321–332.154 At [114]–[122] above.the thoughtless equestrian in Watson, Laidlaw and (actually) by the owners of thenegligent vessel The Mediana, noted two paragraphs earlier. Nor are we persuadedthat excluding the False Licence Agreement from the range of actionableinfringements makes a material difference, because it was the sale of the protectedbudwood that caused loss, not the false grant of non-existent exploitation rights, northe post-dated agreement to supply after the fact. Exclusion of the False LicenceAgreement does not, logically, alter the damages assessable.[137] But in any case, the answer lies in the reasoning underlying the decision ofthe United States Supreme Court in WesternGeco LLC v Ion Geophysical Corp.155In that case the plaintiff owned patents for a sea floor survey system. The defendantmade a competing system, assembled and sold overseas, but manufactured fromcomponents made in the United States. The plaintiff's claim, under the Patent Act, toloss of profits beyond the United States was upheld by a majority of seven to two inthe Supreme Court. The majority held that the cause of action was complete by injuryoccurring within the United States, the unlawful copying of componentry bythe defendant. The location of the infringing sales by the defendant, and theirdisplacement of similar sales by the plaintiff, did not give extraterritorial effect tothe Act.156[138] So, too Zespri. It is a neat misunderstanding of the law to imagine that merelyexporting the budwood sold in breach of Zespri's New Zealand PVRs renders theinfringing parties immune to damages here. The infringing acts were undertaken inNew Zealand. Compensatory damages remain assessable here notwithstanding theexport of the infringing budwood to China. The fact the Judge calculated damages byreference to the acreage offshore (and discounted them given the prospect ofmitigation through regulatory or legal action in China) should not obscure theforegoing reality. Payment of a notional licence fee follows as a consequence of theappropriation of Zespri's New Zealand PVRs in New Zealand. This does not amount,as the appellants suggest, to the enforcement of Chinese, rather than New Zealand,PVRs.155 WesternGeco LLC v Ion Geophysical Corp, above n 129.156 At 8–9.[139] Fifthly, we therefore consider the Judge was entitled to rely on the competitivetender value in 2016 for G3 licences in New Zealand. That value, set at $171,000 perha (GST-exclusive), represents a rational proxy for a hypothetically-negotiated sale ofthe infringing budwood. Zespri contended for that sum at trial. It did not contend fora premium based on impending export into a jurisdiction in which control ofproliferation and quality may be harder to effect, so we put that aside. We have givensome thought to whether damages should have been calculated by reference to theacreage the appellants enabled to be cultivated. No objection based onextraterritoriality can be made to that course, for reasons given. Ultimately, we haveresolved that it is the correct approach. Had the hypothetical negotiation taken place,the area to have been licensed for cultivation would have been a determining factor.It is not for the infringing parties, faced with the enormity of the price, to now repentthe bargain. The deal is done by reason of their actions, and the law simply backfillsthe price, no matter how large or small. However, as noted earlier, we differ from theJudge on the proven area, finding it to be 141.3 ha, rather than 174.2 ha.157 We do notconsider the Judge was bound to apply the earlier decision of this Court in WinchesterInternational (NZ) Ltd v Cropmark Seeds Ltd.158 In that case the plaintiff did notpursue its claim for compensatory damages, being content with declaratory relief anda small award by way of exemplary damages.159[140] Sixthly, as this Court made clear in Eight Mile Style, it is the actualinfringement that matters: "The period of the [notional] licence is the period of actualinfringement".160 It also follows that "delay on the part of the claimant in asserting itsrights" may be relevant.161 In most cases in which damages are assessed via the userprinciple the infringing activity will have been brought to an end by injunctive reliefor concession on the part of the infringer. In Eight Mile Style it was the latter:the infringer, a political party, used the infringing soundtrack in a political partytelevision advertisement 186 times over an eleven-day period in the lead-up to the2014 general election. It stopped using it five days after receiving a letter before action157 See [78] above.158 Winchester International (NZ) Ltd v Cropmark Seeds Ltd, above n 144.159 See Cropmark Seeds Ltd v Winchester International (NZ) Ltd, above n 144, at [35].160 New Zealand National Party v Eight Mile Style, LLC, above n 129, at [29], quoting Copinger andSkone James on Copyright, above n 153, at [21–292].161 New Zealand National Party v Eight Mile Style, LLC, above n 129, at [29], quoting Copinger andSkone James on Copyright, above n 153, at [21–292].by the right-holder's lawyers. The limited duration of use and the fact that only partof the copyright song was infringed were factors expressly taken into account by thisCourt in reducing damages from the award made in the High Court.162 Relatedly, asthe damages are compensatory in nature, mitigation of loss is required. Hence theearlier-noted relevance of delay in assertion of rights. As Moore-Bick LJ observed inUzinterimpex JSC v Standard Bank plc, a case concerning conversion of goods:163To say that a person whose goods have been wrongfully seized by another isnot obliged to negotiate with the person who has taken them, has someattraction, but only because in many cases it will be unreasonable to expecthim to do so. That is particularly true if one takes as an example the personwhose property is stolen by a thief. Is he obliged to negotiate with the thiefto purchase its return? Probably not, because it would be offensive to ordinarynotions of morality to expect him to do so, but, if he had the chance torecapture his property without risk to himself, he might reasonably beexpected to take it. All this indicates that arguments of the kind underconsideration are not really directed at the existence of a duty to mitigate butat the nature of the duty and the kind of action that the victim can reasonablybe expected to take to avoid or reduce his loss.As Assoc Prof Alvin See has observed of that reasoning:164In such a situation, it would surely be reasonable to expect A to informthe relevant enforcement authority. If A's car is taken for a month-long joyrideby B, and assuming that the enforcement authority could reasonably beexpected to recover the car from B within a week had A been prompt inmaking a report, A's recoverable loss should be assessed by reference to oneweek's detention.[141] In this case we think the Judge was correct in applying a 50 per cent discountto the damages assessed, not only because the acreages were not fully planted in G3and G9 but more relevantly because of the expectation that Zespri could be expectedto act on its rights, even if that required action to enforce different rights — that is,those PVRs held in China.165 We think the former of little significance in thehypothetical negotiation, but inexactitude in measurement of the four remainingorchards taken into account is also accounted for by this discount. If the assessment162 New Zealand National Party v Eight Mile Style, LLC, above n 129, at [125].163 Uzinterimpex JSC v Standard Bank plc [2008] EWCA Civ 819, [2008] 2 Lloyd's Rep 456 at [55].164 Alvin W-L See "User damages and the limits of compensatory reasoning" [2018] LMCLQ 73 at94.165 High Court judgment, above n 2, at [170].is rough and ready, it is no more than the fall of the "broad axe" referred to earlier.166We heard no more compelling proposition from the appellants.[142] Finally, we are not persuaded the Judge erred in relation to her assessment ofdamages for Mr Gao's contractual breach of the 2013 and 2014 G3 LicenceAgreements — for which Ms Xue is jointly liable—– summarised above at [128].The argument was not advanced with any vigour before us. However, we shouldclarify that this award of damages compensates part of the same loss compensated bydamages awarded in the PVR claims. The awards are not cumulative.Conclusion[143] In our view, the Judge did not err in principle in fixing damages in this case.[144] The Judge did however err in using a notional licence area of 174.2 ha, ratherthan 141.3 ha. That alters the damages awarded under the first and second causes ofaction only, against Mr Gao and Smiling Face. That damages award, ofNZD 14,894,100, must therefore be reduced to NZD 12,081,150.Result[145] The appeal is allowed to the extent recorded in [144] of this judgment but isotherwise dismissed.[146] The orders at [202(b)–(c)] of the High Court judgment are accordinglyquashed.[147] Orders that Mr Gao is to pay damages to Zespri in the sum of NZD 12,081,150in respect of the first cause of action and that Smiling Face is to pay damages to Zespriin the sum of NZD 12,081,150 in respect of the second cause of action are substituted.166 At [135] above.[148] The appellants succeeded only on a narrow liability point, which did not alterquantum, and separately on a narrow quantum point. For the most part, their appealhas failed. In those circumstances we make no order for costs.Solicitors:Heritage Law, Auckland for AppellantsBuddle Findlay, Auckland for Respondent