Pure Dew Water Company Limited v Pantranz Limited
[2022] NZHC 2027
•17 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2022-404-000784
[2022] NZHC 2027
IN THE MATTER OF a claim for passing off and breach of the Fair Trading Act 1986 BETWEEN
PURE DEW WATER COMPANY LIMITED
Plaintiff
AND
PANTRANZ LIMITED
First Defendant
ORAWAI LIMITED
Second DefendantKYLE WILLIAM PANIORA and SELINA ALICIA PANIORA
Third Defendants
Hearing: 4 August 2022 Appearances:
P J Napier & M G Orange for the Plaintiff N W Coyle for the Defendants
Judgment:
17 August 2022
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 17 August 2022 at 3.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Keegan Alexander, Auckland
Brookfields Lawyers, Auckland
PURE DEW WATER COMPANY LIMITED v PANTRANZ LIMITED [2022] NZHC 2027 [17 August 2022]
Introduction
[1] Pure Dew Water Co Ltd (Pure Dew), a company operated by Belinda and Anthony (Tony) Gillion,1 and PanTranz Ltd and Orawai Ltd, companies operated by Kyle and Selina Paniora,2 are in dispute over the distribution of bottled water in the Auckland region.
[2] PanTranz had contracted with Pure Dew to sell Pure Dew water to customers in defined parts of the Auckland region. Pure Dew alleges that from about March 2022 Pantranz and Orawai sold water that was not produced by Pure Dew without advising customers the water was not Pure Dew water. Pure Dew also alleges that Pantranz and Orawai sold the water in circumstances that would have led the customers to believe the water was Pure Dew water.
[3] Pure Dew says the non-Pure Dew water is of inferior quality to Pure Dew water, which would not accord with customers’ expectations and may pose risks to some customers and to equipment for which some customers specifically seek to use Pure Dew water. Pure Dew says the actions of Pantranz and Orawai have damaged or are likely to damage Pure Dew’s reputation and good will and are in breach of a distribution agreement which Pure Dew says was entered into by PanTranz for the distribution of Pure Dew water.
[4] Pantranz says it began winding down its water distribution business in March 2022 and that, at the same time, Orawai began selling its water products to Pantranz customers. Pantranz says it was not bound by any agreement restricting its freedom to trade or that gave Pure Dew any proprietary interest in its customers. PanTranz and Orawai deny representing or encouraging customers to believe the Orawai water supplied since April 2022 was Pure Dew water. They also say they are not using the Pure Dew trademark or branding and they have removed all Pure Dew labels from their bottles and have taken down the Pure Dew website they previously operated.
1 Belinda Gillion is the sole director of Pure Dew. Futura Trustee Ltd, a corporate trustee of which Belinda and Tony Gillion are directors and shareholders, is the sole shareholder of Pure Dew.
2 Selina Paniora, also known as Selina Rutherford, is the sole director and shareholder of PanTranz. Kyle and Selina Paniora are the directors and shareholders of Orawai.
[5] On 18 May 2022, Pure Dew filed proceedings against PanTranz, Orawai and Kyle and Selina Paniora (the defendants). Pure Dew alleges passing off, breach of the Fair Trading Act 1986 and breaches of the distribution agreement.3
[6]In its statement of claim, Pure Dew seeks:
(a)Orders variously directing the defendants and other entities under their control:
(i)not to sell water products to customers previously supplied with Pure Dew products without advising them that the products are not Pure Dew products;
(ii)to provide Pure Dew a list of PanTranz customers supplied with Pure Dew product for the six months prior to 21 April 2022;
(iii)to remove all reference to Pure Dew’s trademark, branding and products from any websites, signage and marketing materials;
(iv)to deliver up all Pure Dew bottles in their possession;
(b)An inquiry into damages;
(c)An account of profits;
(d)Costs; and
(e)Such further relief as the Court considers just.
[7]Pure Dew also applied by way of interim relief for the orders at [6(a)] above.
3 Although not particularised in the statement of claim, it is apparent Pure Dew alleges a breach of s 9 of the Fair Trading Act. Section 9 provides that no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[8] By consent, on 23 May 2022, the Court made the orders at [6(a)(i) and (iii)] and made timetable directions for the hearing of the further orders at [6(a)(ii) and (iv)].4 The application for further orders is the subject of this decision.
[9] The defendants oppose the making of the further orders. They also challenge the admissibility of some Pure Dew evidence and question the Court’s powers to make the orders sought.
Evidence
[10] Belinda and Tony Gillion have filed affidavits in support of the application for interim orders, as have Ellen-Mary Dolphin, Bruce Hunter, Warwick Rennie and Stuart Hunt, as or on behalf of purchasers of Pure Dew water.
[11]Kyle and Selina Paniora have filed affidavits in opposition.
[12] Belinda and Tony Gillion have filed affidavits in reply, as has Steven Holten, the sole director of Pure Dew Direct Ltd, which is a distributor of Pure Dew products in east and west Auckland.
[13] The defendants object to some of the evidence referred to and exhibited to the affidavits of Belinda and Tony Gillion. I deal with those objections after setting out the relevant background to the disputes. That background takes into account my decisions on the defendants’ objections.
Relevant background
[14] Pure Dew is a family business that supplies bottled water produced at its factory in East Tamaki. Belinda and Tony Gillion operate the business together.
[15] Belinda Gillion says she and Tony have been in the water supply market for over 29 years. They have used the ‘Pure Dew’ brand throughout the period. They first obtained a trademark for the words ‘Pure Dew’ in 1996. The company Pure Dew was
4 Pure Dew Water Company Ltd v PanTranz Ltd CIV-2022-404-784 23 May 2022 (Minute of Woolford J).
incorporated in 2011. Since December 2019, it has held a trademark for those words in relation to water.
[16] Belinda Gillion says Pure Dew distinguishes itself by selling water of a very high purity. Pure Dew uses a combination of five processes to treat its water. Those processes remove 99 per cent of impurities from the water, resulting in water containing no fluoride, chlorine or heavy metals, and less than one part per million (ppm) of dissolved solids. Ms Gillion says Pure Dew has built a strong reputation and significant goodwill because of the exceptionally high quality of its water.
[17] Pure Dew sells its water in supermarkets and direct to homes and business. The water comes in bottles of various sizes, all of which bear a distinctive black label with the trademarked ‘Pure Dew’ name. Pure Dew also contracts with distributors who deliver 15 litre refillable bottles of Pure Dew water to customers. Ms Gillion says distributors operate as authorised representatives of the Pure Dew brand. They purchase Pure Dew water from the factory at East Tamaki and sell it to customers within a defined territory.
PanTranz becomes a Pure Dew distributor
[18] PanTranz became a distributor of Pure Dew water around March 2016 after it purchased the distribution business of a former Pure Dew distributor, Chetta Churacheet. Mr Churacheet had exclusive distribution rights for Pure Dew products in the North Shore and the Auckland Central Business District (CBD).
[19] Kyle Paniora says PanTranz paid Mr Churacheet about $27,000, essentially for his customer list for the Auckland CBD and North Shore areas. Selina Paniora says they agreed to pay Mr Churacheet $28,000 for his delivery van, a business phone number and his customer list.
[20] Tony Gillion says he and Steve Holten met with Kyle Paniora in late February / early March 2016 at the Pure Dew factory. He says he wanted to make sure Mr Paniora was compatible with their business and understood their expectations and business model before he took over Mr Churacheet’s business.
[21] Tony Gillion says he and Mr Holten explained how the distribution business worked. He says they emphasised that PanTranz could only distribute Pure Dew Products to customers and that those customers were still “owned” by Pure Dew. He also says he gave Mr Paniora a copy of Pure Dew’s standard distribution agreement and told him that was the basis of Pure Dew’s relationship with Mr Churacheet and would apply to Mr Paniora if he purchased Mr Churacheet’s business. He says Mr Paniora indicated that he understood this and took the copy of the distribution agreement with him after the meeting ended. Mr Gillion says the agreement was never formally updated and signed to reflect the PanTranz purchase, but he assumed he had Mr Paniora’s agreement to its terms. Tony Gillion exhibited a copy of the distribution agreement to his first affidavit.
[22] Kyle Paniora agrees he met with Tony Gillion and Steve Holten at the Pure Dew factory after discussing the proposed purchase of Mr Churacheet’s business with Selina. He says the purpose of the meeting was to show him how things worked in practice, i.e. where bottles were collected from and delivered back for re-filling. He says he was not given any documents to look at or sign. Selina Paniora says neither Kyle nor Mr Gillion gave her any documents following the meeting. She says the first time she saw the distribution agreement was when she read Tony Gillion’s affidavit.
[23] Steve Holten says he remembers the meeting very well. It discussed Pure Dew’s standard distribution agreement that would apply to the defined area and it was made clear to Kyle that he and Selina would not obtain ownership of Pure Dew’s customers in the area. They also discussed that Kyle and Selina would be acting as Pure Dew’s delivery agent, representing Pure Dew’s brand delivering Pure Dew’s products only and that all distributors were expected to use delivery vans containing Pure Dew signage and that delivery drivers would wear Pure Dew uniforms. He also says he and Tony Gillion made numerous references to the standard distribution agreement and that Tony gave Kyle a copy of the agreement to take away and read.
PanTranz sells Pure Dew water
[24] There is no dispute that after the meeting at the Pure Dew factory, PanTranz started selling Pure Dew water in the area previously serviced by Mr Churacheet.
PanTranz collected full bottles of water from the Pure Dee factory, sold the water to its customers, replaced the bottles when empty and returned them to the Pure Dew factory where they were cleaned and refilled. It appears that PanTranz’s delivery vehicles carried Pure Dew signage.
[25] Belinda Gillion says that, as part of the arrangement with PanTranz, PanTranz paid deposits to use Pure Dew’s bottles. When PanTranz no longer needed the bottles, the deposit would be refunded. Kyle and Selina Paniora say they understood that PanTranz purchased the bottles from Pure Dew and that the purchase price of the bottles was refunded when the bottles were returned to the Pure Dew factory.
[26] Belinda Gillion says that around 2018, PanTranz set up a website with the domain name puredewwater.co.nz which advertised Pure Dew products and made us of the Pure Dew trademark and branding. Although Pure Dew’s consent was not sought, Pure Dew, she and Tony put up with this while PanTranz operated as a distributor of their products.
[27] In 2019, PanTranz purchased Steve Holten’s distribution business for South Auckland. Kyle Paniora says they paid Mr Holten $150,000 for his customer list for South Auckland. Selina Paniora says they paid $150,000 for the list of all South Auckland customers and to take over his business in the area. They both say they did not sign a written agreement with Mr Holten. Selina says she asked Mr Holten for a written agreement, but he never provided one.
[28] Kyle Paniora says he was never told by Mr Churacheet, Mr Holten or Mr Gillion that the customers they were acquiring belonged to Pure Dew or that they could only deliver Pure Dew water.
PanTranz starts supplying Orawai water
[29] Belinda Gillion says that around early April 2022, staff at the Pure Dew factory alerted her to the fact that some of the bottles returned by PanTranz had different tops from those used by Pure Dew. Pure Dew uses only light blue tops while some of the bottles returned by PanTranz had dark blue or opaque white tops. Ms Gillion exhibits pictures of the various tops. She also exhibits a picture taken by Pure Dew staff of the
PanTranz truck which she says shows full bottles of water that bear the Pure Dew label and branding but have non-Pure Dew tops. Ms Gillion says that means the bottles have been refilled and capped elsewhere.
[30] Belinda Gillion also says that during March and April 2022 the number of bottles returned by PanTranz for washing and refilling reduced by about 50 per cent, while the number returned by other distributors remained reasonably constant.
[31] Selina Panoira says that in April 2022, she and Kyle decided to start their own water bottling business and start selling their own product rather than Pure Dew water through Orawai. She says that, as far as they were concerned, there was no issue with them selling their water to customers acquired from Mr Churacheet and Mr Holten and they never represented to any customers that their water was Pure Dew water.
[32] Kyle Paniora also says they did not tell their customers they were still selling Pure Dew water. He says they removed all Pure Dew labels from their inventory of bottles to make it clear they were not selling Pure Dew water and removed the Pure Dew signage from their truck.
Termination of Pure Dew relationship with PanTranz
[33] By letter dated 21 April 2022, Pure Dew’s solicitors wrote to PanTranz stating that Pure Dew had become aware PanTranz had been selling non-Pure Dew water in Pure Dew labelled bottles, which constituted passing off and a breach of the Fair Trading Act. The letter advised that Pure Dew terminated its relationship with PanTranz and required PanTranz to:
(a)stop selling or providing water in Pure Dew bottles;
(b)provide a complete list of entities to which PanTranz had supplied water; and
(c)remove Pure Dew’s logo from PanTranz vehicles and reference to Pure Dew from the PanTranz website, and to change the name of the website.
[34] By email dated 26 April 2022, Kyle Paniora said that, without making any admissions or concessions, PanTranz accepted termination of the relationship and would comply with the request to remove Pure Dew’s logo from its vehicles, website and website name. The email said PanTranz was under no obligation to provide the client list.
Pure Dew contact with customers
[35] Belinda Gillion says that between 1 and 4 May 2022, she was in contact with various users of Pure Dew water, including Ellen-Mary Dolphin, Bruce Hunter, Warwick Rennie and Stuart Hunt. She says some of the users told her they had noticed a change of taste in Pure Dew’s water. Some said they had not been told by PanTranz they were not getting Pure Dew. Some said they had used Pure Dew water because of its high purity level and expressed concern at the effect different water might have on their processes.
[36] The affidavits of Ellen-Mary Dolphin, Bruce Hunter, Warwick Rennie and Stuart Hunt address the same issues.
[37] Mr Hunt, a dentist who uses Pure Dew water in his sterilising equipment, says his large steriliser had become unreliable and that he is of the view this has been caused by the change of water.
[38] Mr Hunter exhibits a copy of a flyer he received in late April 2022 from one of the drivers who delivers his water. Among other things, the flyer stated:
We’re excited to announce today that we’ve expanded our family business venture and have acquired our very own bottling facility. We will now be known as OraWaiTM Pure Still water.
WHAT WILL CHANGE?
Apart from the name, nothing much really! We are still committed to delivering the most pure quality water and the friendliest delivery service in New Zealand.
Orawai website use of Pure Dew branding
[39] Belinda Gillion says that, from 21 April to 3 May 2022, puredewwater.co.nz redirected users to orawai.co.nz which advertised both Orawai products and Pure Dew products. She exhibits a screenshot of the Orawai website taken on 29 April 2022 which has text headed “Pure Dew water delivery coolers” and pictures of Pure Dew branded bottles. Ms Gillion accepts the two websites were later unlinked and Pure Dew’s products have been removed from the Orawai website, although she says the website continues to use graphics and marketing taken from Pure Dew’s marketing materials.
Orawai letter to customers
[40] On 26 May 2022, following the consent orders made on 23 May 2022, Orawai sent a letter to all its customers. Kyle Paniora says the letter was sent to all customers who had given their email addresses and, between 27 and 31 May 2022, was delivered by hand to all customers.
[41]Among other things, the letter stated:
The purpose of this letter is to explain how our business has operated in the past and how it will operate going forward.
Up until about April of this year, you have been dealing with us through our company Pantranz Limited (“Pantranz”). Pantranz was supplying you with Pure Dew water. However, your direct relationship was with Pantranz as all invoices were issued to you by Pantranz and your payments were to Pantranz,
We have now opened our own water bottling facility and started running our business through a new company. That company is Orawai Limited (“Orawai”). Since about April 2022, we have been supplying you with the Orawai brand of water. To be clear, Orawai water is not Pure Dew water. From June 2022, invoices will be issued by Orawai and payments will be made to Orawai.
We wish to make it clear that there are differences between Pure Dew water and Orawai water. Pure Dew Water is distilled. Orawai water is not distilled.
However, we purify our water through an 8 stage filtration system…
[42] Belinda Gillion says she visited Manurewa Healthcare on 31 May 2022. She says the staff said they were unaware the water they were receiving was not Pure Dew water, despite the letter sent by Orawai.
Other evidence
Quality of non-Pure Dew water
[43] Affidavits from Belinda Gillion and Tony Gillion discuss tests carried out at their request by a laboratory, Eurofins Food and Water Testing (Eurofins), of water obtained from customers that had full Pure Dew labelled bottles with non-Pure Dew caps. Belinda discusses this testing in her first affidavit. Tony discusses the testing in a reply affidavit.
[44] Belinda Gillion says tests of water in a bottle obtained on 13 April 2022 from the Royal and Grange Golf Club showed the water contained 9 milligrams of dissolved solids per litre of water as compared with the Pure Dew standard of less than 1 milligram of dissolved solids per litre of water. Ms Gillion’s first affidavit exhibits a copy of an analytical report from Eurofins confirming these results.
[45] Tony Gillion arranged for testing of water in bottles obtained from three other Pure Dew customers on 20 June 2022. One bottle had a best before date of 25 March 2023, indicating the bottle was filled and capped on 25 March 2022. The test results showed the water contained eight milligrams of dissolved solids per litre of water and 2,000 colony forming units of bacteria per millilitre of water (cfu/ml). A second bottle had a best before date of 11 March 2023. The test results showed the water contained 14 – 16 milligrams of dissolved solids per litre of water and 1,000 cfu/ml. Testing of a third bottle showed the water contained 3,000 cfu/ml.
[46] Tony Gillion’s reply affidavit exhibits copies of analytical reports from Eurofins confirming these results. It also exhibits a report of testing of water from a random bottle of genuine Pure Dew water taken from the Pure Dew factory in June 2022. That report shows the water had less than one milligram of dissolved solids per litre of water and less than one cfu/ml.
Numbers of affected customers
[47] Belinda Gillion says Pure Dew believes around 200 to 300 customers have been affected by the actions of PanTranz and Orawai. This estimate is on the basis
that, prior to March 2022, PanTranz was delivering an average of 2,100 filled 15-litre bottles a month, or nearly 100 bottles every work day. Ms Gillion says PanTranz represented approximately 60 per cent of deliveries of Pure Dew water direct to homes and offices.
The standard distribution agreement
[48] Under the Pure Dew Distributor Agreement exhibited to Tony Gillion’s first affidavit, Pure Dew agrees to grant the Distributor a non-exclusive right to establish and operate a Pure Dew Distributor Business in a specified territory. The agreement contains 26 clauses and is over 30 pages in length. Relevant provisions include the following.
[49]Clause 2 includes the following definitions:
“Customer” includes any person for whom the Products and Equipment have been provided to by the Distributor Business at any time prior during [sic] the operation of the Distributor Business
“Customer Information” means all information on Customers of the Distributor in the operation of the Distributor Business including
a)the name, address and telephone number of the Customer
b)the precise nature of the service or product being provided to the Customer
…
“Distributor Business” means the business of operating as a Pure Dew Distributor …
“Equipment” means all equipment approved by Pure Dew for sale, lease or rental by the Distributor including but not limited to water distillation equipment
“Intellectual Property” means all design trademarks, slogans and insignia, logos, designs, patents … which relate to the Distributor Business …
“Packaging” means packaging and containers which may or may not be branded with the Pure Dew logo and other marks including but not limited to water containers and distilling equipment as specified by Pure Dew from time to time
“Products” means all products approved by Pure Dew for distribution by the Distributor including but not limited to Pure Dew water and water related products
[50]Under cl 7, the Distributor agrees to:
… operate the Distributor Business as an independent proprietor and not as an owner, joint venture operator, sub-contractor, agent, servant or employee of Pure Dew.
… use appropriate stationery, paper, letters, signs and other identifying materials for the Distributor Business so as to clearly show that you are an independent proprietor
[51]Under cl 8.2:
(a)The Distributor acknowledges, among other things, that:
Pure Dew is the sole owner of the Customer Information and in the event that this agreement is terminated or assigned, the sole rights to ownership and use of the Customer Information in any capacity remain the property of Pure Dew
(b)The Distributor agrees, among other things, to:
provide at your cost a Vehicle approved by Pure Dew or your use in the operation of the Distributor Businesses
use the Vehicle for the exclusive purpose of operating the Distributor Business and permit no other use of the Vehicle unless authorised by Pure Dew in writing
have the Vehicle signwritten at your cost by a signwriter approved by Pure Dew in the manner approved by Pure Dew …
wear the Uniform supplied by Pure Dew …
follow and comply at all times with the recommendations and directions of Pure Dew as to the operation of the Distributor Business
[52]Under cl 9, the Distributor agrees, among other things, to:
sell only the Products offered by Pure Dew and sell all the Products offered by Pure Dew
[53] Under cl 22, if the agreement is terminated or comes to an end, the Distributor agrees, among other things to:
deliver to Pure Dew the used uniforms and other branded and unbranded materials and property relating to and used in the Distributor Business …
cease to exploit or use … the Distributor Business name, Trademarks, manuals, marketing materials or any of the other Intellectual Property
[54] Under cl 24, if the Agreement was terminated, the Distributor agrees, for a year after termination, not to solicit orders from customers who had been customers during the year prior to termination.
[55] No provision in the Agreement deals directly with ownership of bottles in which Pure Dew water is delivered, or with deposits payable on such bottles, or with the ownership or return of bottles after termination of the Agreement.
Pure Dew invoices
[56] Selina exhibits a copy of an invoice from Pure Dew which includes the following entries:
QUANTITY DESCRIPTION PRICE/ UNIT TOTAL 1,656
15L Filled
$3.86
$6,392.16
1,656
15L – Bottle Deposit
$19.13
$31,679.28
(1,993)
15L – Bottle Deposit
$19.13
-$38,126.09
362
15L Filled
$3.86
$1,397.32
362
15L – Bottle Deposit
$19.13
$6,925.06
(104)
15L – Bottle Deposit
$19.13
-$1,989.52
Questions for consideration
[57] In Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, the Court of Appeal articulated the three-step analysis that is generally followed for consideration of applications for injunctions and other forms of interim relief:5
(a)Is there was a serious issue to be tried?
5 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142; see also Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344, [2020] NZCCLR 29 at [23] – [24].
(b)Where does the balance of convenience lie?
(c)Would damages be an adequate remedy?
[58] The submissions of counsel for Pure Dew and for the defendants addressed those questions. Before dealing with those submissions, however, it is appropriate to consider the defendants’ challenges to the evidence and to the Court’s powers to make the orders that Pure Dew seeks.
Defendants’ challenges to the evidence
[59] The defendants say references to and copies of the analytical reports into the quality of water alleged to have been supplied by the defendants are opinion evidence and hearsay and should be declared inadmissible. They also say Pure Dew failed to seek leave to file reply affidavits that extend beyond the scope permitted in r 7.26 of the High Court Rules 2016.6 The defendants also object to certain statements in Belinda Gillion’s reply affidavit concerning the state of knowledge of Manurewa Healthcare staff about the water supplied by Pantranz / Orawai.
Submissions of counsel
[60] Mr Napier, counsel for Pure Dew, submits it is common for expert reports to be exhibited to affidavits of the principals in a dispute, particularly in interlocutory applications. Mr Napier submits it is in the interests of justice for the laboratory reports on the quality of the non-Pure Dew to be admitted as provided for under r 7.30 of the High Court Rules.7 He also points out that, in accordance with s 18 of the Evidence Act 2006, a Judge may admit business records if they consider requiring the report writers to be witnesses would cause undue expense and delay. Mr Napier also applies for leave to adduce the reply affidavits is leave is required.
[61] Mr Coyle, counsel for the defendants, submits it is not clear the persons who conducted the tests are suitably qualified experts or were the persons who prepared
6 Rule 7.26(2) provides that affidavits in reply must be limited to new matters raised in a respondent’s notice of opposition or affidavits.
7 Rule 7.30(1)(c) provides a Judge may accept statements of belief in an affidavit in which the grounds for the belief are given if it is in the interests of justice.
the reports, 8or that the water tested was in fact taken from the bottles referred to by the Gillions. Mr Coyle says the Court should also take into account the fact that a number of the analytical reports, including those stating that levels of bacteria were present in the non-Pure Dew water, were included in the Gillions’ reply affidavits to which the defendants had not had the opportunity to reply. Mr Coyle submits that, in addition to being hearsay, the statements of Manurewa Healthcare staff reported by Ms Gillion are being proffered to try and prove the defendants did not deliver copies of the letter of 26 May 2022 and that Mr Paniora’s evidence is false.
Analysis and decision
[62] I am satisfied it is in the interests of justice for the analytical reports with the results of laboratory testing of water to be admitted in evidence and that to require the report writers to be witnesses would cause undue expense and delay. It is not necessary or appropriate to make findings as to the accuracy or probative value of the reports at this interlocutory stage. However, the fact there are reports indicating that non-Pure Dew water supplied by Pantranz or Orawai may be of a lesser quality than Pure Dew water and may contain elevated levels of bacteria is relevant to whether I should make the orders sought, particularly the order seeking the Pantranz customer list.
[63] I am also satisfied it is appropriate to grant leave to Pure Dew to file the reply affidavits to the extent they address matters not strictly in reply to the defendants’ affidavits.
[64] Belinda Gillion does not say in her reply affidavit that the fact the Manurewa Healthcare staff of to whom she spoke on 31 May 2022 were unaware that the water they were receiving was not Pure Dew water proves the defendants did not deliver the letter of 26 May or that Mr Paniora was being untruthful on that question. Ms Gillion’s point was simply that those staff were not aware of the change of supplier despite the letter. Mr Napier made that same point more generally. He said just because emails had been sent did not mean they were read or received by the relevant people.
8 Citing Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n at 133.
[65] I agree. The same can be said of a notice delivered with bottles of water. There is no way of knowing whether the person who took delivery of the bottles passed the note on to the staff at Manurewa Healthcare who use the water. I do not consider the evidence of what was said by the staff at Manurewa Healthcare is being put forward for the purpose asserted by Mr Coyle. I am satisfied the evidence is relevant to whether I should make the order concerning the Pantranz customer list.
[66] For these reasons, I dismiss the defendants’ application to exclude those aspects of the Pure Dew evidence.
Does the Court have power to make the orders sought?
[67] Mr Coyle says the interim relief Pure Dew seeks arises from alleged contraventions of the Fair Trading Act rather than any contractual right to customer information or to the bottles. He says because Pure Dew alleges misleading and deceptive conduct in breach of s 9 of the Fair Trading Act, the Court’s powers to grant injunctive relief are constrained by s 41 of that Act which provides, in effect, that where misleading and deceptive conduct is alleged, the Court’s injunctive powers are limited to restraining a person from conduct that would be misleading and deceptive.
[68] Mr Coyle says that in Sale 33 Ltd v M D Designer International Ltd, Thomas J accepted that the granting of an injunction under s 41 must specifically correlate to the contravening conduct under the Act rather than the ancillary effects of the conduct.9 He says the defendants are already prevented by the orders made on 23 May 2022 from conduct that would be misleading and deceptive in the terms alleged by Pure Dew. He says the orders now sought in relation to the list of customers and the use of bottles are dealing with ancillary effects of the alleged conduct and outside the Court’s powers under s 41.
[69] Because the allegations made under the passing off cause of action are identical to those under the Fair Trading Act cause of action, Mr Coyle says the same constraints should apply to injunctive relief granted under the passing off cause of action. He does not, however, refer to any authority in support of that proposition.
9 Sale 33 Ltd v M D Designer International Ltd [2015] NZHC 3029, (2015) 17 NZCPR 95 at [26].
[70] Mr Napier does not contest Mr Coyle’s submissions regarding the scope of injunctive relief under the Fair Trading Act. He says the limitations under that Act do not constrain the Court’s powers to grant injunctive relief under the separate common law action of passing off. Mr Napier refers to the decision of the English High Court of Justice in Freedman v Hillingden Shirts Co confirms the Courts have full jurisdiction to grant injunctive relief under actions for passing off.10
Analysis
[71] I do not accept that the relief Pure Dew seeks is limited to breaches of the Fair Trading Act.
[72] First, having regard to the evidence of Tony Gillion and Steven Holten, it is clearly arguable that Kyle Paniora was given a copy of, and that PanTranz was bound by, the terms of the standard distribution agreement. On that basis, it is also arguable that PanTranz is in breach of the agreement, which asserts that Pure Dew is the owner of all information on customers of the Distributor. Those matters, and whether the agreement is enforceable in its own terms, will have to be decided at the substantive hearing. It is curious that Pure Dew can assert such broad rights as provided for in the agreement over a distributor who is stated to be an independent proprietor and not a sub-contractor, agent, servant or employee of Pure Dew. For the moment, however, it is sufficient to record that I am satisfied it is arguable that PanTranz is bound by and in breach of the standard distribution agreement.
[73] Secondly, while the agreement does not address the ownership of the bottles, based on the invoice exhibited to Selina Paniora’s affidavit, it is also clearly arguable Pure Dew remained the owner of all bottles PanTranz took from the Pure Dew factory. The entries on the invoice indicate it was part of the agreed arrangement between Pure Dew and PanTranz that a deposit of $19.13 was charged on each full bottle of Pure Dew water taken away from the factory and a refund of the same amount was paid when the bottles were returned.
10 Freedman v Hillingden Shirts Co [1975] Fleet Street Patent Reports 449 at 450.
[74] Thirdly, whatever the content of the agreement between Pure Dew and PanTranz, the evidence strongly suggests that, for at least a period in March and April 2022, PanTranz / Orawai sold non-Pure Dew water in Pure Dew bottles without telling the customers the water was not Pure Dew water. Mr Napier invites me to find, even at this interlocutory phase, that PanTranz and Orawai have engaged in passing off. I refrain from doing so because I consider such findings are better left to the judge hearing the substantive application. For present purposes, it is enough to find it is strongly arguable that PanTranz and Orawai have engaged in passing off.
[75] Fourthly, I do not accept that because the actions giving rise to the allegations of passing off also give rise to the alleged breaches of the Fair Trading Act means the limitations on relief in the Fair Trading Act also apply to relief for passing off.
[76]Section 41(1) of the Fair Trading Act begins:
(1)The court may, on the application of the Commission or any other person, grant an injunction restraining a person from engaging in conduct that constitutes or would constitute any of the following—
(a)a contravention of any of the provisions of Parts 1 to 4:
(b)…
[77] All of the remaining sub-paragraphs in s 46(1) refer to actions in relation to “such a provision” – that is, any of the provisions of Parts 1 to 4 of the Fair Trading Act. It follows that any constraints on the Court’s jurisdiction to grant injunctive relief under that section are limited to contraventions of the Fair Trading Act.
[78] While actions that breach s 9 of the Fair Trading Act may also constitute passing off, it is clear from the purpose of the Act as set out on s 1A(1), the Act has a much broader scope and a different focus from the tort of passing off.11 In addition, nothing in the Act limits the scope of that tort or the Court’s powers to grant remedies
11 Section 1A(1) provides the purpose of the Act is to contribute to a trading environment in which—
(a)the interests of consumers are protected; and
(b)businesses compete effectively; and
(c)consumers and businesses participate confidently.
in relation to the tort. To the contrary, it is clear from s 50(2) of the Fair Trading Act that the Act does not limit liability under other rules of law.12
[79] For these reasons, I do not accept the Court’s powers to grant injunctive relief in relation to an action for passing off are constrained by s 46 of the Fair Trading Act. I am also satisfied the Court has the power to make the orders Pure Dew seeks.
Is there a serious issue to be tried?
[80] For the reasons already given, I consider it is strongly arguable PanTranz and Orawai have engaged in passing off. It is also arguable PanTranz is subject to and in breach of the terms in the standard distribution agreement and is retaining possession of bottles owned by Pure Dew. In all these respects, therefore, I am satisfied there are serious issues to be tried and a sufficient basis to make the interim orders Pure Dew seeks.
Balance of convenience
[81] Mr Coyle submits that any damage caused to Pure Dew by the defendants’ actions has already been remedied or substantially mitigated by the letter Orawai sent to its customers in late May 2022. He also says the defendants would lose the commercial value in the exclusive use of the customer information if forced to hand over the customer lists and there is a serious risk Pure Dew would cause damage to the defendants’ reputations if it were able to speak directly to the PanTranz customers.
[82] Mr Coyle also says it has not been established that Pure Dew bottles with labels removed are significantly different from other bottles used for the supply of water to warrant an order requiring their return pending determination of ownership of the bottles. He also says any risk of customers being confused by Orawai delivering water in Pure Dew bottles can be met by an order restraining the defendants from using the bottles pending the outcome of the substantive hearing. Mr Coyle also submits it would be inappropriate to order the return of the bottles before their ownership has
12 Section 50(2) provides “Nothing in this Act limits or affects any liability that any person may incur under any rule of law or enactment other than this Act.”
been determined and that Pure Dew, with its greater resources, is better placed than Orawai to do without the use of the bottles in the meantime.
[83] Mr Napier submits the Orawai letter is inadequate to protect Pure Dew’s interests and reputation, particularly in view of the number of likely affected customers. Pure Dew seeks to achieve a full product because of the risks of damage to the equipment of customers who use Pure Dew water because of its high level of purity and because of the levels of impurity, including the presence of bacteria, found in the non-Pure Dew water delivered by PanTranz / Orawai. He says it is likely there are Pure Dew labelled bottles with non-Pure Dew water that were delivered to customers before the Orawai letter and which have “best before” dates extending out to March or April 2023. Unless that water is recovered, there is a risk of damage to Pure Dew’s reputation if customers or their equipment are adversely affected by the non-Pure Dew water.
[84] Mr Napier says the Orawai letter risks giving the impression Pure Dew was complicit in the substitution of Orawai water for Pure Dew water and does not explain that Pure Dew was unaware of what had happened. The letter also does not offer customers the option of continuing to receive Pure Dew water. Nor can Pure Dew be confident all customers have received and read the letter. However, to lessen the burden on the defendants, Pure Dew would be content to receive a list of PanTranz customers supplied with Pure Dew product for the three months prior to 21 April 2022.
[85] Mr Napier says that, because of the distinctive shape of Pure Dew bottles, an order requiring their return lessens the risk of continuing the passing off. He also points out that, unlike the defendants, Pure Dew has given an undertaking as to damages which would apply in the unlikely event the bottles are held to be the property of PanTranz.
Analysis
[86] As I indicated at the hearing, I am satisfied the balance of convenience strongly favours Pure Dew, at least with respect to Pure Dew being able to contact the customers. It is likely some customers will have purchased Pure Dew water because of its high levels of purity and will be unhappy that water they believed to be from
Pure Dew is from another source and may be of a lesser quality. It is also possible that some damage to specialised equipment and perhaps to people could result.
[87] I am also satisfied that the Orawai letter sent to customers in late May 2022 does not adequately mitigate that and the other risks pointed to by Mr Napier. I also accept, however, that until there has been a determination of Pure Dew’s substantive proceeding there should be safeguards to protect the defendants’ position.
[88] For these reasons, I encouraged Mr Napier and Mr Coyle to confer with a view to reaching agreement on the terms of an appropriate order. Counsel came close to reaching agreement on such an order but disagreed on how Pure Dew should describe the reasons for the approach to customers. Counsel accepted, however, that I might draw on the draft order they had discussed in making my own order.
[89] The balance of convenience is less pronounced when it comes to the order for the return of the bottles. The evidence for the Pure Dew bottles being significantly different from bottes used by other water suppliers is simply an assertion by Tony Gillion and is not supported by any objective analysis or comparative photographic evidence. I also accept that Pure Dew can more easily fund the purchase of replacements for the bottles than the defendants.
[90] However, the invoice Selina Paniora has put in evidence strongly suggests that the case for Pure Dew ownership of the bottles is much stronger than that advanced by the defendants for ownership by PanTranz. That factor, coupled with the evidence strongly suggesting the defendants have sought to appropriate Pew Dew’s business for themselves, satisfies me it would not be appropriate to allow the defendants to continue to use or retain the bottles pending determination of Pure Dew’s substantive claims. To allow the defendants to continue to use bottles that are probably the property of Pure Dew to develop their rival business would compound the alleged mischief and would not be in the interests of justice.
[91] For these reasons, I am satisfied that the balance of convenience favours Pure Dew with respect to both orders it seeks.
Would damages be an adequate remedy?
[92] I am satisfied damages would not be an adequate remedy if the order seeking the customer list were not granted. Proof and calculation of loss to Pure Dew’s reputation would be difficult. If the losses were significant, there is also likely to be a question over the defendants’ ability to pay.
[93] Damages might well be an adequate remedy with respect to the return of the bottles. However, for the reasons given above, I do not consider it would be in the interests of justice for the defendants to retain possession of the Pure Dew bottles pending determination of Pure Dew’s substantive claims.
Result and orders
[94] Subject to the modifications below, I grant Pure Dew’s application for interim orders.
[95]I make the following orders:
(a)PanTranz shall provide Pure Dew a list of all customers to which it supplied any water products in its capacity as a Pure Dew distributor in the three months prior to 21 April 2022.
This order is made subject to the following conditions:
(i)Pure Dew shall contact the customers on the list only for the purposes of:
1. Ascertaining whether those customers are on possession of labelled or non-labelled Pure Dew bottles filled with non- Pure Dew water;
2. Replacing the non-Pure Dew water with Pure Dew water if the customers so wish; and
3. Ascertaining whether the customers wish to be supplied with Pure Dew water in the future and, if so, fulfilling any such orders.
(ii)Pure Dew’s agents and representatives shall not make any disparaging statements about the defendants but may explain that:
1. PanTranz was, until April 2022, contracted as a Pure Dew distributor;
2. Pure Dew has reason to believe that, at least in some instances, PanTranz may have supplied customers with non-Pure Dew water in labelled and non-labelled Pure Dew bottles, and that water may not be of the same quality as Pure Dew water; and
3. The matter is now before the Court.
(b)PanTranz, Orawai, Kyle Paniora and Selina Paniora shall deliver up to Pure Dew all Pure Dew bottles in their possession which PanTranz obtained in its capacity as a Pure Dew distributor.
Costs
[96] Pure Dew is entitled to costs on 2B basis. If Pure Dew wishes to seek increased costs or if the parties are not able to agree costs, they may submit memoranda of no more than five pages.
[97] Any memorandum from Pure Dew should be filed and served by 13 September 2022.
[98] Any memorandum from the defendants should be filed and served by 27 September 2022.
G J van Bohemen J
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