FEDERAL COURT OF AUSTRALIA Nick Scali Limited v Super A-Mart Pty Ltd [2010] FCA 1130 Citation: Nick Scali Limited v Super A-Mart Pty Ltd [2010] FCA 1130 Parties: NICK SCALI LIMITED (ACN 000 403 896) v SUPER A-MART PTY LTD (ACN 009 810 324) File number: NSD 1142 of 2010 Judge: YATES J Date of judgment: 15 October 2010 Catchwords: EVIDENCE – admissibility of evidence of conversations –consideration of principles relevant to trap orders in passing-off cases – relevance of principles to the application of s 135(a) of the Evidence Act 1995 (Cth) –whether probative value of evidence of conversations substantially outweighed by the danger that the evidence might be unfairly prejudicial to the respondent Ruling: Evidence admitted. Legislation: Evidence Act 1995 (Cth), s 135 Cases cited: Cellular Clothing Company Ltd v G White & Company Ltd (1952) 70 RPC 9 C. Stillitz (a Firm) v Jones & Higgins Ltd (1942) 60 RPC 15 Bryant v Keith Harris & Co Ltd (1980) 33 ALR 437 Fox's Glacier Mints Ltd v Joblings (1932) 49 RPC 352 O.T. Co v Muir (1914) 31 WN (NSW) 87 Procea Products Ltd v Evans & Sons Ltd (1951) 68 RPC 210 Showerings Limited v Cheltenham & Hereford Breweries Ltd [1958] RPC 446 Showerings Ltd v The Blackpool Tower Co Ltd [1975] 1 FSR 40 Date of hearing: 15 October 2010 Date of publication of reasons: 19 October 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 23 Counsel for the Applicant: Mr S Burley SC and Mr H P T Bevan Solicitor for the Applicant: DLA Phillips Fox Counsel for the Respondent: Mr R Cobden SC and Mr N R Murray Solicitor for the Respondent: Clayton Utz IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1142 of 2010 BETWEEN: NICK SCALI LIMITED (ACN 000 403 896) Applicant AND: SUPER A-MART PTY LTD (ACN 009 810 324) Respondent JUDGE: YATES J DATE OF ORDER: 15 OCTOBER 2010 WHERE MADE: SYDNEY THE COURT RULES THAT: 1. Paragraphs 39 to 59 of the affidavit of Alan Noel Gould sworn 16 September 2010 be admitted into evidence. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1142 of 2010 BETWEEN: NICK SCALI LIMITED (ACN 000 403 896) Applicant AND: SUPER A-MART PTY LTD (ACN 009 810 324) Respondent JUDGE: YATES J DATE: 19 OCTOBER 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 15 October 2010, after receiving evidence on a voir dire and considering the submissions of counsel, I gave a ruling on the admissibility of certain evidence. At the time I said that, in order to facilitate the expeditious conduct of the hearing, I would not pause to deliver orally detailed reasons for my ruling but would publish written reasons at a later time. The parties were content with that course. These are those reasons. 2 In this proceeding the applicant seeks injunctive and pecuniary relief in respect of conduct engaged in by the respondent claimed to be in contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth) and to constitute passing-off. 3 The applicant seeks, by way of affidavit, to adduce evidence in chief of certain conversations in which, according to that evidence, the respondent's sales assistants made statements which, the applicant alleges, constitute part of the impugned conduct. The conversations are particularised in paragraph 26A of the further amended statement of claim. The respondent denies the allegations made in that paragraph. 4 The particular evidence in support of these allegations is: (a) in paragraphs 7 to 20 of the affidavit of Bruce Verschuuren sworn 14 September 2010 in respect of a conversation that Mr Verschuuren had with a female sales assistant wearing a name badge bearing the name "Lee" at the respondent's store at 1904 Sandgate Road, Virginia on 1 September 2010; and (b) in paragraphs 39 to 102 of the affidavit of Alan Noel Gould sworn 16 September 2010 in respect of a number of conversations, being separate conversations that he had with a male sales assistant who identified himself as "Haydn" (now known to be Haydn Mount) and also an unidentified female sales assistant at the respondent's store at 540 Kessels Road, MacGregor on 30 August 2010; a conversation that he had with an unidentified male sales assistant at the respondent's store at Oxley on 31 August 2010; and a conversation with a male sales assistant who identified himself as "Neil" at the respondent's store at 117 Ashmore Road, Benowa on 10 September 2010. 5 All these stores are located in Queensland. 6 All but one of the conversations to which Mr Gould was a party occurred before the commencement of the proceeding. The conversation to which Mr Verschuuren was a party took place before the proceeding was commenced. 7 Notice of the applicant's intention to adduce this evidence was first given, in the case of Mr Verschuuren, by serving an approved but unsworn copy of his affidavit on the evening of 13 September 2010 and, in the case of Mr Gould, by serving an unsealed copy of his affidavit, without annexures, late in the morning on 16 September 2010. In this connection I should note that, in correspondence with the respondent's solicitors on 2 September 2010, the applicant's solicitors sought undertakings with respect to the making of representations by the respondent's sales assistants to the effect that the respondent buys lounge suites from the applicant and copies them, and that the respondent's lounge suites (i.e. the copied ones) are "exactly the same". However the applicant's solicitors' correspondence did not identify where, when and by whom these representations were alleged to have been made. It is not in dispute that the respondent operates 29 stores located in Queensland, New South Wales, Western Australia, South Australia and Victoria. It is also clear that the alleged representation, in the simplified terms in which it was notified to the respondent's solicitors, does not engage fully, or indeed accurately, the terms in which Mr Gould has deposed to the conversations to which he was party. 8 Although the respondent foreshadowed objection to the applicant adducing evidence of all these conversations, the respondent sought a ruling on the admissibility of paragraphs 39 to 59 of Mr Gould's affidavit, which deal with a conversation that Mr Gould had with Mr Mount when visiting the respondent's MacGregor store on the morning of 30 August 2010. My ruling was thus confined to the admissibility of those paragraphs, although, at the time of publication of these reasons, subsequent rulings have been made on other paragraphs of Mr Gould's affidavit in which he deposes to other conversations that are challenged by the respondent. Mr Gould has also now been cross-examined and certain other evidence has been admitted, without objection, in the course of Mr Gould's re-examination. These reasons, however, represent my reasons at the time of making the ruling on paragraphs 39 to 59 of Mr Gould's affidavit, unaffected by subsequent events and evidence. 9 The respondent submitted that, in reliance on s 135(a) of the Evidence Act 1995 (Cth) (the Evidence Act) I should refuse to admit paragraphs 39 to 59 of Mr Gould's affidavit into evidence because the probative value of the evidence in this form was substantially outweighed by the danger that it might be unfairly prejudicial to the respondent. In that connection the respondent submitted that the exercise of the discretion in s 135(a) of the Evidence Act in this case should be informed by what the respondent said was a rule of practice in respect of the tender of evidence of "trap" orders in passing-off cases concerning the timely giving of notice of the intention to rely on such evidence. In the present case the respondent says that the applicant did not give timely notice of the fact of the conversations on which it proposed to rely in support of the allegations made in paragraph 26A of the further amended statement of claim. 10 The practice to which the respondent refers is identified in Cellular Clothing Company Ltd v G White & Company Ltd (1952) 70 RPC 9. That case concerned two trap orders in which a simple request was made for "Aertex" material from sales assistants at the defendant's store. "Aertex" was found to be a well-known mark signifying the plaintiff's cotton piece goods. Harman J (as he was) said (at 14): The object of the persons who asked for the "Aertex" material was to obtain something which was not "Aertex" material, and it has been pointed out again and again that, that being so, although trap orders are a necessity, they are to some extent an odious necessity and they have to be looked at, therefore, with the greatest suspicion. There are I do not think it right to say rules, but there is a practice which has grown up around these orders to the effect that, if you wish to rely on them and nothing else, you must either support them by some written evidence or you must at least bring them to the notice of the person, the assistant or whoever it is that is trapped, at once, because otherwise the answer of the assistant always is, as it was in this case, that he or she does not remember the incident, and the Court is thereby not at all assisted to find out what the truth is. The fact that an assistant a month or so later says she does not remember the incident only proves the honesty of the assistant; but, if the matter is drawn to her attention within 24 hours, then she cannot say that in a Court, and at least I have the satisfaction of knowing what her reaction was soon afterwards. What happened about these orders? These people went to the shop with instructions by no means to give away what they were at. They withdrew secretly, no doubt delighted with their own successes, and no word was allowed to leak out to the Defendants. 11 Harman J later said (at 15) that "this is exactly the way in which trap orders should not be given". In the end result the evidence of the trap orders was the only evidence to support the passing-off case. Harman J (at 15) continued: Two orders of this kind – standing as the only evidence of passing-off which remains in this case if I reject the August 9th incident, as I do – are, in my judgment, not nearly of strong enough a character to support a claim for an injunction of this sort. What exactly happened, I do not know. Something like what the Plaintiffs' witnesses say may have happened, but whether they brought home to the attention of the two assistants the fact that they were really asking for the Plaintiffs' goods, or did not do so, I am left entirely in the dark. I think it would be quite wrong if I accepted such fragile evidence, with no confirmation at all, and which has been sedulously concealed from the Defendants contrary to all the practice, of which the Plaintiff Company and their advisers must be well aware. They, being a very large concern, must have been concerned in many actions of this sort. It would not be right to rely on that to support a claim for an injunction. 12 The existence of this practice, or at least the appropriateness and desirability of such a practice, is recognised in other cases: see, for example, Fox's Glacier Mints Ltd v Joblings (1932) 49 RPC 352 at 358; C. Stillitz (a Firm) v Jones & Higgins Ltd (1942) 60 RPC 15 at 16-17; Showerings Limited v Cheltenham & Hereford Breweries Ltd [1958] RPC 446 at 447; Showerings Ltd v The Blackpool Tower Co Ltd [1975] 1 FSR 40 at 41. The appropriateness and desirability of such a practice is also recognised in Australian cases: see, for example, O.T. Co v Muir (1914) 31 WN (NSW) 87; Bryant v Keith Harris & Co Ltd (1980) 33 ALR 437. 13 I was not referred, however, to any decision (and I am not aware of any decision) in which the reported practice had been elevated to a rule of admissibility of evidence or which had led to the discretionary rejection of evidence at the stage of tender (as opposed to its ultimate non-acceptance as a proper foundation for fact-finding in the context of all the evidence). What the cases do show is that, in certain circumstances, the failure to give timely notice of the intention to adduce such evidence is a factor going to the weight to be given to the evidence of the trap order. Indeed, in Bryant, Lockhart J (at 452) saw the failure to give timely notice, should it reflect unfairness, as going only to weight, not admissibility. In the same case Franki J said (at 441): … notice should be given concerning the details of any trap order at the time of the trap order, or so soon thereafter as is reasonably practicable, bearing in mind the problem that notice may adversely affect the collection of evidence by the plaintiff (see generally O T Co v Muir (1914) 31 WN(NSW) 87 at 88). If appropriate notice is not given the plaintiff runs the risk that the evidence will not be accepted. 14 I would not read Franki J's observation that "the evidence will not be accepted" as a statement that the evidence will be rejected at the stage of tender. Rather, I would read his Honour's observation as a reflection on the weight that might be given to the evidence of a trap order once it has been received in evidence, should appropriately timely notice not be given of such evidence. 15 It is clear that trap orders must be carried out with absolute fairness. For this purpose, Roxburgh J in Procea Products Ltd v Evans & Sons Ltd (1951) 68 RPC 210 said (at 211) that trap orders "must be scanned with a special degree of severity". He went on to illustrate that proposition (at 211 - 212) as follows: It seems to me that the burden upon a person executing a trap order does not extend beyond this: that he must be absolutely fair (a thing that I agree is not always easy when executing a trap order, and that is why they have to be so carefully scrutinised), he must give the order in circumstances such that he has the undivided attention of the person to whom he is giving the order (that is to say, he must not interpose a question when in the middle of a queue or something of that kind and take some random answer as a passing-off; he must see that he has the undivided attention of the assistant), he must, of course, do absolutely nothing which might be calculated to induce the person whom he is seeking to trap to fall into the trap (that, of course, would be fatal a objection to a trap order) and he must endeavour, so far as possible, to reproduce the conditions which would prevail if, instead of being a trap order, it was a genuine order; that is to say, if, as I think in this sort of trade is usual, bread is ordered verbally, I can see no reason why the order should not be verbal. 16 Thus the circumstances in which the trap order is made may be critical. Accordingly, the opportunity, if any, afforded to the party against whom the evidence is to be adduced to undertake timely investigation of those circumstances may be necessary 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. But, plainly, much will depend on the circumstances of each case. The reported cases in which trenchant criticism has been made of a failure to give timely notice of such evidence have usually involved evidence that, on analysis, reveals a real possibility of unreliability for one reason or another. In such cases the failure to give timely notice appears to have been treated as an additional reason – but not the reason – why the evidence of the trap order should not be relied on to make adverse findings respecting the party against whom it is adduced. 17 The evidence to which objection is taken in the present case does not involve a trap order in the usual sense of that term. However it does share a characteristic of evidence of a trap order: unbeknown to each person engaged in the relevant conversation, transaction or event, his or her answers or reactions to a question or request, made by an initiator in pretence, is intended to be used in evidence adversely to that person or to another in whose interest that person acts or is taken to act. Evidence having this provenance is not unusual in litigation where the causes of action involve allegations of conduct claimed to be misleading or deceptive or calculated to lead to deception or confusion. The obtaining of such evidence, by means of engaging persons in conversations, such as in the present case, is countenanced without criticism unless the obtaining of the evidence involves some additional conduct involving impropriety. It is not suggested that there has been any impropriety in the obtaining of the challenged evidence in this case. What the respondent does complain about is the fact that, the evidence having been obtained, notice should have been given of it (including adequate particulars) well before service of the affidavits in question. 18 In other respects the evidence to which objection is taken is quite unlike the evidence of many trap orders that consists of a request, and a perfunctory response to a request, for goods under a given name or description. Here, however, Mr Mount was engaged by Mr Gould in an extended conversation about the price, qualities and origin of two goods being compared. At least on its face, the evidence does not exhibit the qualities of actual or latent ambiguity of language that sometimes attend evidence of trap orders. 19 Of course, the observations made in the cases about evidence of trap orders were not in the context of dealing with discretionary exclusion under s 135(a) of the Evidence Act. The issue before me is whether the probative value of the evidence in paragraphs 39 to 59 of Mr Gould's affidavit is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the respondent. Nevertheless, it seems to me that the cases on trap orders do raise considerations that are appropriate to be taken into account in considering the application of s 135(a) in a case such as the present. 20 It is not suggested by the respondent that the evidence in question would not be of probative value. Although no concession has been made by the respondent, it is plain that the evidence in question is direct evidence of a conversation given in considerable detail which, if accepted, is capable of supporting the allegations pleaded in paragraph 26A of the further amended statement of claim. The focus of the respondent's objection is that, if the evidence is received, it will suffer prejudice. In that regard it submitted that it had been placed in a position of unfairness because Mr Mount is unable to recall the details of his conversation with Mr Gould, save in some respects. It is implicit in this submission that, had timely notice been given, Mr Mount would have been better able to recall this conversation. I say nothing further on that matter at the present time. The respondent did, however, call in aid, as a generalised proposition, the considerable advantages enjoyed by Mr Gould as the initiator of an event appreciated by him to be of some considerable importance and the correlative disadvantages suffered by Mr Mount who must be taken to be ignorant of the true circumstances in which the conversations were taking place and who thus had no reason to place any significance upon them, particularly with a view to recalling their details. 21 For its part, the applicant submitted that the respondent had been able to identify Mr Mount as the relevant party to the conversation with Mr Gould and that, based on Mr Mount's responsive affidavit, which was read on the voir dire, Mr Mount was in a position to engage (and, if read into evidence in the respondent's case, would engage) Mr Gould on the accuracy of the conversations to which he (Mr Gould) deposed. The applicant thus submitted that the respondent had demonstrated no prejudice to be weighed in the balance. 22 I am conscious of the fact that Mr Gould has now been cross-examined and that there is a real likelihood that Mr Mount's affidavit will be read into evidence in the respondent's case, subject to all proper objections, if any, to be made. If that affidavit is read then the applicant has stated that Mr Mount will be cross-examined. In the circumstances, and out of fairness to all parties, I do not propose, therefore, to engage in any detailed discussion of how certain aspects of Mr Gould's affidavit evidence (as it was then sought to be read), or certain aspects of Mr Mount's affidavit evidence (as it might be read), presented themselves to me at the time of making my ruling. It is sufficient for me to say that, prior to giving my ruling, I had taken into account the detail of the conversation in the paragraphs of Mr Gould's affidavit to which objection had been taken, and the likely response to be given by Mr Mount, as I was invited to do by both parties. I had also taken into account the likely probative value of the relevant paragraphs of Mr Gould's affidavit and the nature and extent of the risk of unfairness as articulated in the parties' submissions. In the circumstances, I was not persuaded that it had been demonstrated that the probative value of the evidence in paragraphs 39 to 59 of Mr Gould's affidavit was substantially outweighed by the danger that the evidence might be unfairly prejudicial to the respondent. For that reason I admitted those paragraphs into evidence, no other objection to them having been made. 23 I wish to make it clear, however, that I do regard the matters raised by the respondent as being relevant to my overall assessment of the events deposed to by Mr Gould and of any evidence to be given by Mr Mount in respect of the conversations in question. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 19 October 2010