22 Nov 2010

Making your trap count in passing off claims

by Mary Still, Natalie Shoolman

It is commonplace in litigation involving claims of misleading or deceptive conduct or passing off to rely on evidence obtained by way of "trap" orders or dealings. The recent decision in Nick Scali Limited v Super A-Mart Pty Limited [2010] FCA 1130 highlights that the weight given to such evidence could be diminished where the applicant fails to give timely notice of the trap dealing to the respondent.

Nick Scali commenced proceedings against Super A-Mart for breach of sections 52 and 53 of the Trade Practices Act 1974 (Cth) and passing-off.

The claims related to:

  • a comparative advertisement run on television that carried the strapline "Compare the Product, Compare the Price" and referred to the price of a lounge suite sold by each of the parties;
  • placards placed on Super A-Mart's furniture comparing the price of its lounge suite to Nick Scali's lounge suite; and
  • oral representations allegedly made by a number of Super A-Mart's sales representatives to the effect that a particular lounge suite sold by Super A-Mart was the same as a lounge suite sold by Nick Scali.

All but one of the trap dealings that Nick Scali sought to rely upon occurred before the proceedings. Yet Nick Scali did not give Super A-Mart notice of the dealings until about two weeks after the proceedings were commenced, when it served its evidence.

Super A-Mart submitted that the Court should exercise its discretion under section 135(a) of the Evidence Act and not admit evidence of a particular trap dealings, which Nick Scali sought to adduce by way of affidavit evidence, as the probative value of the evidence was substantially outweighed by the danger that it might be unfairly prejudicial to Super A-Mart.

Super A-Mart asserted that it would suffer prejudice as the passage of time meant that it was deprived of the opportunity of properly investigating the dealings. In particular, the relevant sales representatives no longer had a full recollection of the alleged conversations relied upon.

Decision

Justice Yates held that the evidence in question was admissible, as he was not persuaded that the probative value of the evidence was substantially outweighed by the danger that the evidence might be unfairly prejudicial to Super A-Mart.

However, he emphasised that "trap orders must be carried out with absolute fairness" and warned "I wish to make it clear, however, that I do regard the matters raised by [Super A-Mart] as being relevant to my overall assessment of the events deposed to".

In examining the authorities on trap orders, Justice Yates stated:

  • the circumstances in which the trap order is made may be critical;
  • in order to persuade the Court that the evidence of the trap orders provides a satisfactory basis from which findings of fact can be made, it may be necessary to afford the opposing party the opportunity to undertake timely investigation of the relevant circumstances;
  • however, the failure to give timely notice, should it reflect unfairness, goes to weight only, not to admissibility of evidence.

The trial concluded on 10 November 2010 and judgment is yet to be received by the parties.

Clayton Utz acted for Super A-Mart in these proceedings.


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