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Holdfast New Zealand Ltd v Mechanical Plastics Corp

(2013 NZCA 335; 30th July 2013)

Holdfast appealed a High Court judgment that found them liable for passing off and misleading conduct under s 9 of the Fair Trading Act 1986. Mechanical Plastics Corp (MPC) is a USA based company that manufactures TOGGLER and ALLIGATOR brand wall anchors. In 1994 MPC entered into a distribution agreement with Holdfast for supply in New Zealand. While the distribution agreement lapsed after a year, MPC continued to supply Holdfast and direct any inquiries from New Zealand companies to Holdfast. In 2005 MPC became aware that Holdfast was supplying its own BULLDOG brand in response to customer requests for the MPC wall anchors. In late 2006 MPC appointed another party as its exclusive distributor in New Zealand.
The case is of interest because it involves that relatively rare species of passing off known as “reverse passing off”.
The Court of Appeal upheld the majority of the High Court Judge’s conclusions. While supplying substitute goods with the knowledge and consent of the customer is not passing off, Holdfast had not done that. Holdfast had used confusingly similar product codes; advertised and sold MPC products in BULLDOG packaging; and continued to represent that it was an authorised distributor of MPC’s products. While careful examination could distinguish the products, the loss of an incautious purchaser is just as damaging as the loss of a careful one.
However, Holdfast was successful in overturning the trial Judge’s finding that it had engaged in switch selling. ‘Switch selling’ involves deliberately advertising particular goods as being available when they are not, so that the attracted customers can be persuaded to buy other goods.
While this involves misrepresentation the Court of Appeal held that does not necessarily amount to the misapprehension in the mind of the customer that they are getting the claimant’s goods rather than those of the defendant. Here, there was insuffient evidence on the impact of this particular advertising by Holdfast on the retail hardware chains they supplied.