THG has become embroiled in a bitter High Court legal dispute with a former Australian business partner over claims of unpaid bills.
Manchester-based THG turned to the courts last September to pursue alleged unpaid invoices worth £1.4m owed by Queensland-based Nutrition Depot.
Nutrition Depot had been THG’s exclusive distributor of MyProtein products in China and Macau. THG argued Nutrition Depot had breached its distribution agreement by not settling the invoices.
However, Nutrition Depot has claimed it did not receive the goods in question and has accused THG of complicity in an alleged Chinese tax fraud scheme.
THG has said the accusations were “incoherent, inadequately particularised and, in places, nonsensical”.
In a defence submitted to the Commercial Court, Nutrition Depot claimed that the London-listed company was aware of a plot by a group of Chinese companies to avoid customs import duty and sales tax.
Nutrition Depot said it had an agreement to supply 10 Chinese businesses it refers to in court documents at the “Dalian Group”.
However, the Australian company claimed that one of THG’s marketing team had worked “in conjunction” with the Chinese companies to “order overseas goods in small quantities and in multiple batches using special order codes that he provided to the Dalian group”.
The arrangement was allegedly to avoid taxes on the imports. Parcels being shipped directly to individuals worth less than 300 yuan (£33) are exempt from duties and taxes, though in some cases this this rises to 500 yuan.
Nutrition Depot claimed the Chinese companies then resold the protein, alleging that THG “benefited from increased sales” because of the arrangement. It claimed THG senior managers were made aware of the situation.
THG has since issued a legal response, in which it denied any involvement in a scheme and breach of UK data rules. It said it “was not aware that any goods so ordered were for resale in avoidance of Chinese customs and taxes (if that was the case)” and denied partnering with the group of Chinese companies.
THG said it had not been contacted by Chinese authorities on this matter, with the allegations against its marketing employee viewed as an attempt to discredit a witness in the case.
A spokesman for the company said: “THG is the claimant in this action, which we launched as a last resort to recover unpaid debts. We are extremely confident in our position and the claims made by Nutrition Depot are entirely without merit.”
The dispute comes as the Manchester business starts to show signs of progress in turnaround efforts, revealing in April that it had almost halved its losses over the past year.
THG, which also owns brands such as Cult Beauty and Lookfantastic, has however struggled to shrug off pressure from shareholders. Last week, activist investor Kelso said it was planning to vote against THG’s chairman at its annual meeting.