The case is interesting in that it relates primarily not to similarities in the appearance, get-up, or names of the products concerned (as is more common for a claim of this kind), but rather to the circumstances and manner in which Holdfast went about supplying product.

Holdfast had formerly been a distributor of MPC products in New Zealand under an agreement which lapsed in 1995. Holdfast continued to order MPC products after this time, and MPC continued on occasion to refer to Holdfast as its New Zealand distributor.

In 2005, MPC became aware that Holdfast was supplying its own product in response to orders for MPC products. In 2006, MPC appointed a third party company as its exclusive New Zealand distributor.

After hearing evidence, Andrews J accepted the following material facts (observing that Holdfast’s primary witness’s evidence was neither credible nor reliable):

“(a)   Holdfast supplied its own BULLDOG branded anchors when fulfilling orders placed for MPC 's products by name.

 (b)    Holdfast supplied BULLDOG anchors in response to orders placed for MPC's products according to retailers' SKU numbers (i.e. product codes) corresponding to MPC's products.

 (c)    Holdfast utilised product codes for products in the BULLDOG range which were confusingly similar to those used for the corresponding products in MPC's product range.

 (d)  Holdfast sold MPC products in BULLDOG packaging.

 (e)  Holdfast told a customer who enquired as to MPC products that the anchors supplied to him were “the way they (i.e. MPC products) are made now”.

 (f)  Holdfast continued to represent that it was an authorised distributor of MPC's products on its website and in promotional material after the cessation of that relationship.

 (g)  Holdfast represented that it continued to be in a strategic alliance with MPC.”

MPC’s claim under the Fair Trading Act 1986

The Court was satisfied as to a breach of s9. Holdfast had made misrepresentations by representing that its product was that of MPC by supplying Holdfast’s BULLDOG products in response to orders for MPC’s products. Such orders were made for MPC products by name, or by product codes allocated to MPC’s products. It was only by virtue of Holdfast’s previous role as MPC’s distributor that Holdfast could substitute its products for MPC’s, and customers were not alerted by the substitution.

Andrews J did not accept Holdfast’s submission that when customers received products, they could see they were packaged in BULLDOG packaging, and could return the products if they were not happy. Such a submission wrongly placed an onus on the customer not to be misled and deceived, which is not the intention of s9 of the Fair Trading Act. Further, a retailer could not be expected to inspect every delivery of product.

Holdfast made further misrepresentations by including depictions of MPC products on its website, and depicting itself as in a strategic alliance with MPC, when it was no longer distributing MPC products. Customers loyal to the plaintiff’s brand could be misled into acquiring the wrong product.

Further still, Holdfast’s supply of MPC’s products in Holdfast packaging could lead to customers making later purchases of Holdfast products, based on the performance of the MPC products which they were in fact sold (an example of post-sale confusion).

MPC’s claim in passing off – proof of loss

Observing that it is impossible to enumerate or clarify all the possible ways in which a person may make a false representation for the purposes of passing off, Andrews J found that the instances of misleading and deceptive conduct already made out under the Fair Trading Act were also misrepresentations for the purposes of the tort of passing off .

The Court then turned to consider whether the misrepresentation was calculated to injure the business of MPC (a matter which is a requirement of passing off, but not a requirement for a breach of s9 of the Fair Trading Act).

Andrews J observed that the requirement of injury is met if injury to the other trader’s business is a reasonably foreseeable consequence and considered the conclusion that injury to MPC’s business or goodwill was reasonably foreseeable to be “inescapable”.

As noted by the Court, there must be a nexus between the relevant deception and any diversion of trade (for instance the mere presence of a competitor in the market is insufficient). In this regard, the Court noted two categories of deception leading to diversion of trade. The first was where a purchaser knew and liked a product of a particular manufacturer, and wished to purchase more of that product (“source motivation”). Where such a consumer purchased a deceptively similar product on the basis of an assumption of source, and the intrinsic qualities of the product were not clear at the point of sale, a causative link between the plaintiff’s loss is presumed. In the second category, where the qualities of the product were clear at the point of sale, thenproof of loss is necessary.

In the present case, where Holdfast made misrepresentations by supplying its own product in response to orders for MPC products, as well as by representations that it continued to be authorised distributor of MPC products when it was not, damages could be presumed. The qualities of the products concerned were not wholly or largely transparent at point of sale (in fact the products were ordered on the basis that they were MPC products). Accordingly, proof of loss was not necessary (although such loss was in fact proven).

Holdfast’s submission that the claim in passing off could not succeed because the relevant packaging was clearly marked with Holdfast’s BULLDOG mark was rejected, since post-sale confusion was actionable, and since there were misrepresentations concerning the circumstance and manner in which the product was sold, matters which did occur before the sales were made.

Relief

There was an indication that Holdfast had given inadequate discovery and hence MPC was not able to specify the full impact of Holdfast’s misrepresentation. This was taken into account in the course of relief in that an inquiry as to damages was awarded along with an order that Holdfast disclose evidence of sales. An injunction was also awarded. MPC’s claim for punitive damages was reserved for further consideration.