Fonterra Brands Australia Pty Ltd and anor v Bega Cheese Ltd (No 2)
[2019] VSC 209
•4 April 2019
IN THE SUPREME COURT OF VICTORIA
Not Restricted
AT MELBOURNE
COMMERCIAL COURT
S ECI 2017 00283
FONTERRA BRANDS AUSTRALIA PTY LTD (ACN 095 181 669)
First Plaintiff/First Defendant by Counterclaim
BONLAND CHEESE TRADING PTY LTD (ACN 001 148 992)
Second Plaintiff/Second Defendant by Counterclaim
v
BEGA CHEESE LIMITED (ACN 008 358 503)
Defendant/Plaintiff by Counterclaim
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JUDGE:
Daly AsJ
WHERE HELD:
Melbourne
DATE OF HEARING:
12 March 2019, further written submissions filed 22 March 2019 and 26 March 2019
DATE OF JUDGMENT:
4 April 2019
CASE MAY BE CITED AS:
Fonterra Brands Australia Pty Ltd and anor v Bega Cheese Ltd (No 2)
MEDIUM NEUTRAL CITATION:
[2019] VSC 209 Revised 18 June 2019
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PRACTICE AND PROCEDURE – Confidentiality – Party seeking to vary confidentiality regime – Whether the circle of confidentiality should be extended to include an external legal advisor retained by the party but not the solicitor on the record in the proceeding – Comparison of the position of a party’s external legal advisor with the position of a party’s in‑house counsel – Consideration of the extent to which the parties are, or may potentially be, trade rivals – IOOF Holdings v Maurice Blackburn (No 2) [2016] VSC 594 and Cargill Australia Ltd v Viterra Malt Pty Ltd [2018] VSCA 260, applied – Whether the present application amounts to relitigation of matters already dealt with in previous rulings and applications – AED Oil Ltd v Puffin FPSO Ltd (No 5) [2011] VSC 60, referred to – Order granted for external legal advisor to have access to confidential information, with liberty to apply, in relation to a limited category of documents – Subject to minor adjustments, the confidentiality regime remains in place
DISCOVERY - Application for affidavit to explain what searches have been undertaken for discovered documents – s 55B of the Civil Procedure Act 2010 (Vic) not a mechanism for enforcement of discovery obligations.
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APPEARANCES:
Counsel
Solicitors
For the First and Second Plaintiffs
Mr G D Dalton QC with
Ms J Williams
Arnold Bloch Liebler
For the Defendant
Mr K Loxley
Gilbert + Tobin
HER HONOUR:
Introduction and Background
1 This ruling concerns the latest in a series of disputes concerning the discovery process and the regime for inspection of documents over which the plaintiffs (‘Fonterra’) claim contains confidential information (‘confidentiality regime’). More detail regarding the parties to the proceeding, the issues in dispute in the proceeding, and the confidentiality regime are to be found in my earlier decision in Fonterra Brands Australia Pty ltd & Anor v Bega Cheese Ltd on 24 August 2018 (’24 August ruling’), following which I made orders on 21 September 2018 regarding the terms and scope of the confidentiality regime to apply to the discovery process between the parties (’21 September orders’).
2 The 21 September orders were made on the basis of the following findings and observations in the 24 August ruling:
(a) the information in the confidential documents is, prima facie, commercially sensitive, and information which Fonterra would understandably wish to keep confidential;
(b) further, while some protection is afforded by the Harman undertaking, I accept that the broader the dissemination of the confidential documents, there is a greater risk of inadvertent breaches of the Harman undertaking. Further, while there was no evidence adduced or submissions made with respect to this matter, I believe that I can infer that personnel movements and ownership changes within the dairy products industry may increase the risk of Fonterra’s confidential information being within the knowledge of personnel of entities in a more direct competitive relationship with Fonterra;
(c) while I accept Bega’s submissions to the effect that the degree of trade rivalry between Fonterra and Bega has been somewhat overstated by Fonterra, I also note that this position could change in the not too distant future. At the very least, the fact of this litigation and the nature of the issues in this proceeding indicate that the commercial relationship between Fonterra and Bega has soured;
(d) when allocating the sample documents to different categories, I have had regard to the fact that, while it is accepted by Fonterra that the information in the confidential documents is relevant for the purposes of making discovery, the centrality of the information to the issues in the proceeding varies according to the classes of documents and the nature of the information;
(e) I accept that the imposition of restrictions on access to discovered documents can be quite inconvenient for the legal representatives and experts engaged by Bega for the purposes of this litigation, and carries with it the risk of unfairness;
(f) on that basis, I do consider that it is necessary for Bega’s lawyers and experts to be able to take instructions from time to time from representatives of Bega. I also consider that the nominated Bega representatives are of such seniority such as to be of sufficient distance from operational matters to limit the risk of any inadvertent use of confidential information;
(g) I note that some of the confidential documents may include information which is confidential to third parties, such as supermarket businesses, and those third parties have not had an opportunity to be heard on this application; and
(h) some of the confidential documents may include information that would not cause particular concern if only disclosed to Bega personnel (such as Bega brand specific marketing plans), but would be if disclosed to other competitors of Fonterra in the retail cheese and food service markets.
3 In the 24 August ruling, I went on to make the following observations regarding particular categories of documents, concerning their degree of commercial sensitivity and their relevance to the proceeding:
(a) the financial information of Fonterra is generally of tangential relevance to the issues in the proceeding, while being highly sensitive from Fonterra’s perspective;
(b) information concerning trade spend in relation to Fonterra’s products (both Bega branded products and other Fonterra branded products) is directly relevant to the issues in the proceeding, and also very commercially sensitive to Fonterra, and possibly third parties such as Woolworths;
(c) information concerning market trends, insofar as it is information collated from publicly available industry information or research carried out by third parties, is relevant to the issues in the proceeding, but not particularly commercially sensitive. However, Fonterra’s proposed responses to identified market trends would be directly relevant to the issues in the proceeding, and also very commercially sensitive to Fonterra;
(d) historical information concerning marketing plans and new product development would be of direct relevance to the issues in the proceeding, but, given its historical nature, even with respect to non Bega branded products, would be of less commercial sensitivity to Fonterra;
(e) information concerning Fonterra’s private label and food service offerings would be of limited, if any, relevance to the issues in the proceeding, given that the allegations in the counterclaim concern Fonterra’s maintenance of the value of the Bega brand, but would be commercially sensitive to Fonterra;
(f) current and forward looking marketing plans for Bega branded and other Fonterra products would be highly commercially sensitive, but, given the nature of the allegations in the counterclaim, would be only of moderate relevance to the issues in the proceeding, which largely concerns Fonterra’s past conduct;
(g) while the parties in their submissions did not draw any distinction between current marketing plans and current new product development plans, having reviewed the sample documents, I do consider such a distinction should be made, and I do so on the basis that plans for new product development are likely to be substantially more commercially sensitive than marketing plans for existing products; and
(h) information about ‘brand health’, insofar as it concerns cheese products, would be of direct relevance to the issues in the proceeding, but would also be commercially sensitive to Fonterra.
4 Since that time, the parties have been before me on a number of discovery applications, which have been the subject of a series of hearings and two unpublished rulings. Further, during this period, the scheduled trial date of 6 February 2019 was vacated, and on 8 February 2019, Fonterra issued a new proceeding seeking to restrain Bega from terminating the Trademark License Agreement dated 8 May 2001 (‘TMLA’), which is the foundation of the commercial relationship between the parties. That proceeding has now been consolidated with this proceeding, which is now scheduled to commence in November 2019, with an estimated hearing time of eight weeks. It is not overstating matters to say that, in the words of senior counsel for Fonterra, the parties are engaged in a ‘commercial war’.
5 The 21 September orders provided for documents containing confidential information found to require protection greater than that afforded by the Harman undertaking to be allocated into three categories, each with different restrictions. These categories included:
(B) Protected Information is information relating to:
(i) [Fonterra’s] profit, contribution margin, gross margin, adjusted gross margin, earnings before interest and taxes, and contribution to earnings before interest and taxes;
(ii) the Plaintiffs’ products that are not relevant to issues in dispute.
(C) Category A Information is:
(i) current information concerning new product development plans, food service strategies, private label strategies;
(ii) Protected Information; and
(iii) documents of a like nature provided in the Annexure of the ruling of Associate Justice Daly dated 24 August 2018.
(D) Category B Information is:
(i) financial information (including CAM);
(ii) information concerning trade spend; and
(iii) documents of a like nature provided in the Annexure of the ruling of Associate Justice Daly dated 24 August 2018.
(E) Category C Information is:
(i) marketing plans going forward for both Bega branded products and other Fonterra products; and
(ii) documents of a like nature provided in the Annexure of the ruling of Associate Justice Daly dated 24 August 2018.
6 Inspection of Category A information was limited to Bega’s independent legal advisors and experts engaged by Bega for the purpose of this proceeding. The 21 September orders provided that:
Category B Information may be disclosed to:
(a) persons permitted to inspect the Category A Information;
(b) Mr Michael Hampson and Mr Colin Griffin of the Defendant after they have first signed and provided to the Plaintiffs’ solicitors the Confidentiality Undertaking.
Category C Information may be disclosed to:
(a) persons permitted to inspect the Category A or B Information;
(b) any employee or agent of the Defendant, but only after:
(i) the employee or agent has first signed the Confidentiality Undertaking;
(ii) a copy of that signed undertaking has been provided to the solicitors for the Plaintiffs; and
(iii) 2 business days have elapsed since a copy of that undertaking was provided to the solicitor for Plaintiff, and solicitors for the Plaintiffs have not notified any objection to the inspection of the Category C Information by the employee or agent.
7 The 21 September orders provided for the parties to have liberty to apply. Further, paragraph 14 of the 21 September orders provided that:
‘For the avoidance of doubt, liberty to apply in paragraph 13 of those orders expressly reserves the right of [Bega] to challenge the categorisation of the confidential information by [Fonterra].’
8 Subsequent to the making of the 21 September orders, I made the following substantive orders regarding discovery and the confidentiality regime:
(a) on 18 October 2018 I made orders that Fonterra discover a database showing sales data for various cheese products; and made orders providing for the re-classification of certain confidential information;
(b) on 25 October 2018, I made orders that Bega discover certain categories of documents, and undertake specific searches for documents concerning the negotiation of the TMLA (‘TMLA negotiation documents’);
(c) on 30 November 2018, I made orders directing that both Fonterra and Bega give discovery in respect of a number of categories of documents. I also made orders that Fonterra prepare a proposed ‘financial template’ summarising certain financial information regarding Bega branded cheese products and other branded cheese products, including data regarding marketing expenditure;
(d) on 10 December 2018 I made orders, in part by consent, that Fonterra make searches of specific custodians in respect of a number of categories of documents, and ordered that Bega make discovery of a further category of documents; and
(e) on 20 December 2018 I made orders that Fonterra undertake a random sampling exercise with respect to a cache of potentially discoverable documents, that it undertake further searches of documents held by particular custodians, and to prepare sets of confidential documents presented in a particular way for the purposes of the confidentiality regime.
9 On 5 March 2019, Bega filed and served a summons seeking the following relief:
The Plaintiffs’ Confidentiality regime
Amendment to form of confidentiality undertaking
1 Paragraph 2 of the Orders made by the Honourable Associate Justice Daly on 21 September 2018 (Confidentiality Orders) regarding the confidentiality regime in this proceeding be varied such that the reference to the Confidentiality Undertaking be a reference to the Confidentiality Undertaking as attached to this summons as Annexure A to this summons.
Amendment to Category C confidential information
2 Paragraph 1(e)(i) of the Other Matters section of the Confidentiality Orders (which defines the Plaintiffs’ Category C confidential information) be varied to read: “marketing plans going forward (i.e. plans to be executed in 2019 and beyond) for Fonterra products other than Bega branded products”.
3 The Plaintiffs review their claims for Category C information and confirm which claims are no longer pressed in light of Order 3 above.
Amendments to categorisation of Protected Information and Category A Information
4 Paragraph 1(b)(i) of the Confidentiality Orders be deleted from Paragraph (1)(b) and Paragraph(1)(d)(i) be varied to read: “financial information (including CAM, The Plaintiffs’ profit, contribution margin, gross margin, adjusted gross margin, earnings before interest and taxes, and contribution to earnings before interest and taxes).”
5 Paragraph 1(c)(i) of the Other Matters section of the Confidentiality Orders be varied to read: “current information concerning new product development plans and food service strategies for the Plaintiffs’ non Bega branded products, and the Plaintiffs’ private label strategies”.
Discovery
6 The Plaintiffs provide an affidavit:
a. explaining the instructions given to Ashurst and K&L Gates to search for the documents that were discovered by the Plaintiffs relating to the negotiation of the Trade Mark Licence Agreements in 2000/2001;
b. explaining the instructions given to the Plaintiffs to search their own records in respect of the negotiation of the Trade Mark Licence Agreements;
c. stating whether the Plaintiffs’ search of its own records produced any discoverable documents;
d. stating whether the Plaintiffs are aware of any other repositories which could potentially contain relevant documents; and
e. explaining what the Plaintiffs’ document retention policies are and whether these have resulted in any potentially relevant documents being deleted; and
f. confirming that the Plaintiffs have discovered all discoverable documents relating to the negotiation of the TMLAs in 2000 / 2001.
Proposed financial template
7 By 19 March 2019, the Plaintiffs provide an amended version of the financial template served on 30 November 2018 that:
a. uses data based on only the calendar year or only the financial year, but not both
b. expressly states that discretionary trade spend includes co-op trade spend;
c. expressly explains the difference between the “Media ‘Share of Voice’ Estimates” and the “Total A&P Spend” figures;
d. contains, in Part E, an exhaustive list of promotional activities undertaken under the Beg a brand in each year; and
e. contains, in Part E, the actual or budgeted amount for each promotional activity listed therein.
10 Bega’s application was supported by an affidavit sworn by its solicitor, Ms Janet Whiting of Gilbert + Tobin (‘G+T’), on 5 March 2019, and another solicitor, Ms Elizabeth Hilliard on 8 March 2019. Fonterra’s solicitor, Mr Matthew Lees of Arnold Bloch Liebler (‘ABL’), swore affidavits in response on 8 March 2019 and 12 March 2019, and the applications were heard on 12 March 2019.
11 In its application, Bega seeks to vary the confidentiality regime to:
(a) extend the class of people entitled to inspect all documents to any external lawyer engaged by Bega;
(b) to relieve G + T from the obligation to forward confidentiality undertakings for lawyers to Fonterra’s solicitors; and
(c) reclassify certain categories of confidential information to extend the class of people entitled to inspect Fonterra’s financial information, and marketing and new product development plans for Bega branded products sold by Fonterra.
12 Further, Bega seeks orders compelling Fonterra to depose as to the efforts made by it to locate the TMLA negotiation documents, and to provide an amended financial template to ensure that financial data is presented in a consistent manner, and to provide more information regarding Fonterra’s expenditure on specific promotional campaigns.
13 Subsequent to the hearing on 12 March 2019, on 15 March 2019, Ms Hilliard swore a further affidavit in relation to the role of Mr David Ferguson, a partner of Addisons Lawyers retained by Bega, for the purpose of further assisting in the determination of Bega’s application with respect to the confidentiality regime. Mr Lees also filed and served an affidavit sworn on 19 March 2019 with respect to the extent to which products manufactured by Bega compete with products manufactured by Fonterra, included Bega branded products. On 25 March 2019, Ms Hilliard filed and served an affidavit in response to Mr Lees’ affidavit of 19 March 2019.
14 On 22 March 2019, the parties filed and served submissions in respect of the questions of whether the circle of confidentiality be extended beyond Bega’s solicitors on the record in this proceeding (and counsel and experts retained by it) to include any external lawyer engaged by it, including Mr Ferguson. On 26 March 2019, the parties filed and served further submissions in respect of the matters raised by Mr Lees in his affidavit of 19 March 2019, which discussed the extent to which Fonterra and Bega are, or may potentially be, trade rivals.
15 My determinations and reasons in relation to each of Bega’s applications follow.
The Confidentiality Regime
16 Bega’s proposed variations to the confidentiality regime was the primary issue in dispute at the hearing on 12 March 2019. Bega seeks to vary the confidential regime to:
(a) relieve G+T from the obligation to forward to ABL copies of undertakings executed by Bega’s external lawyers as new solicitors and counsel are added to the team;
(b) extend the class of ‘authorised recipients’ beyond partners and employees of G+T and counsel retained by Bega in the proceeding to ‘duly admitted legal practitioners’. The stated purpose of seeking this amendment is to enable Mr David Ferguson, a partner of Addison’s Lawyers, to view all documents discovered by Fonterra in this proceeding.
(c) amend the definition of Category C information to read ‘marketing plans going forward (i.e. plans to be executed in 2019 and beyond) for Fonterra products other than Bega branded products’. This would leave documents recording marketing plans going forward with respect to Bega branded producers being protected only by the Harman undertaking;
(d) the definition of ‘protected information’ and ‘Category B” information be amended to enable the Bega Executives to inspect Fonterra’s financial information; and
(e) the exclusion from Category A information of ‘current information concerning new product development plans and food service strategies for Bega branded products’. This would leave documents in this category of documents protected only by the Harman undertaking. It is convenient for the purpose of this ruling to deal with category (c) and this category together.
17 Prior to turning to the applications in detail, I will deal with some preliminary, and over‑arching issues. First, in the 24 August ruling, I referred to the principles applicable to applications of the current kind set out by Elliott J in IOOF Holdings v Maurice Blackburn (No 2) (‘IOOF’). Since that time, the Court of Appeal has expressly endorsed his Honour’s statement in IOOF, in Cargill Australia Ltd v Viterra Malt Pty Ltd (‘Cargill’). Further, in Cargill, the majority made a number of observations regarding the significance of the existence of a trade rivalry to the resolution of applications of this nature, and the particular position of in‑house counsel, which are of particular relevance to the current applications.
18 Secondly, Fonterra relied upon a number of authorities in support of its contention that, in many respects, Bega was seeking to relitigate a number of matters which have already been dealt with in the 24 August ruling and later applications. In particular, Fonterra relied upon the decision of Judd J in AED Oil Ltd v Puffin FPSO Ltd (No 5), and the decision of the Full Court of the Federal Court in APM Investments Pty Ltd v Trade Practices Commission in support of the proposition that it is impermissible for a party to contrive to re‑agitate interlocutory disputes in the absence of new facts or compelling circumstances, which is what Bega is attempting to do in the current application.
19 I have no difficulty with the proposition advanced by Fonterra above, and will take that into account when assessing Bega’s applications. However, the principle of finality carries less force where the application is made in the context of an ongoing case management process of the nature in which the parties and the Court are engaged in the current proceeding. While there have been a series of discrete interlocutory applications concerning the confidentiality regime and the discovery obligations of the parties, it is fair to say that this has been a somewhat iterative process, with there being some flexibility to make any modifications to the discovery process necessary or desirable to accommodate changes in the proceeding over time.
20 Further, and relevantly, there have been a number of developments since the making of the 21 September orders. First, while the 21 September orders concerned a proposed confidentiality regime, the application made by Bega on 5 March 2019 has been made after the parties have spent a number of months implementing and working within the constraints of the confidentiality regime, which included a period (up until mid‑December 2018) when the parties were busy preparing for a trial scheduled to commence in February 2019. It is not remarkable that Bega in particular would now be in a better position to identify particular logistical and forensic difficulties with the confidentiality regime than it was prior to the making of the 21 September orders. Conversely, I am also conscious that Fonterra has also expended considerable resources in giving effect to the confidentiality regime as established by the 21 September orders.
21 Secondly, while the ‘liberty to apply’ granted in the 21 September orders expressly referred to Bega challenging the categorisation of documents, the terms of the relevant order are inclusive, not exclusive. While I expected that most disputes would arise in respect of the categorisation of documents, it would be unfair to shut Bega out of bringing to the Court’s attention practical difficulties and inconveniences experienced by it owing to the operation of the confidentiality regime over time.
22 Thirdly, there have been developments in the dispute between Fonterra and Bega which have raised the temperature and stakes of the dispute between the parties. While I understand that this course had been threatened beforehand, on 30 October 2018 Bega served upon Fonterra a notice purporting to be a notice of breach under the TMLA (‘breach notice’), which would, if found to be valid, entitle Bega to terminate the TMLA. On 8 February 2019, Fonterra issued a proceeding challenging the validity of the breach notice (‘2019 proceeding’), which has now been consolidated with this proceeding.
23 Fourthly, while there is some dispute about Bega’s ambitions and intentions with respect to the launch of new cheese products under the ‘Farmer’s Table’ brand, it is not in dispute that Bega has launched a cheese product, and a butter product, under this brand.
24 Finally, at the time of the 21 September orders, it was not in the contemplation of the parties and the Court that Bega would retain any external lawyers other than solicitors from G+T and counsel to assist Bega with this litigation.
25 Accordingly, while the endless relitigation of otherwise resolved disputes should not be permitted or encouraged, there has been a sufficient change in the litigation and commercial landscape to warrant determining Bega’s applications largely on their merits. Further, while the decision of the Court of Appeal in Cargill does not effect a fundamental change in the law, as noted above, there were some observations made by the Court of Appeal which have relevance to the current applications. In the end, the approach I have adopted is consistent with the following statement in APM Investments Pty Ltd v Trade Practices Commission:
Whether or not ‘new facts’ in the sense there referred to are always necessary under O 35, r 7(2)(c), the parties seeking the discharge or modification of an interlocutory order will have the onus of establishing that enforcement of the order is unjust. In the absence of ‘new facts’, it will not ordinarily be unjust to insist that a party abides by an order made or an undertaking given. Even where ‘new facts’ can be pointed to, justice may require that the order or undertaking be adhered to; for example, if any alternative course would be productive of injustice to the other party. In the event that, whichever course is followed, there will be detriment to one party or another, the court’s task will not involve a mere reassessment of the balance of convenience. The onus will remain on the party seeking to have the existing order set aside or varied. Even if the possibility be acknowledged that, despite a lack of ‘new facts’, substantial detriment which an order is causing one party may constitute injustice in the absence of some detriment to the other party from the variation or alteration of the order, in a contest in which, whichever course if followed, there will be detriment to one or other party (and this case provides a striking example of such a contest), an absence of ‘new facts’ will usually be of critical significance and will generally be decisive that justice requires that the order be permitted to stand.
26 As noted above, the authorities, most recently the Court of Appeal in Cargill, make it clear that the existence and extent of any trade rivalry between parties to litigation is a significant consideration in applications of the current kind. As stated by the majority in Cargill:
The above discussion indicates that a key factual issue in the exercise of a court’s discretion to determine who should have access to confidential discovered documents is whether the parties are trade rivals. The parties’ status as trade rivals is significant because it informs the magnitude of the risk of loss of confidentiality, and the potential prejudice resulting from such loss, if access to such documents is not restricted to the opposing party’s external lawyers and independent experts who give confidentiality undertakings.
Accordingly, the parties’ status as trade rivals is a material consideration to a court’s determination of who should be given access to confidential discovered documents. The subject matter of the litigation and the identity, role, expertise and experience of every person whom a party nominates to be a recipient of confidential documents discovered by the opposing party subject to the giving of a confidentiality undertaking are important to that determination. The scope of confidentiality undertakings to be given by those persons and the nature and efficacy of any sanctions that may be available against them for breaches of such undertakings are also important.
27 Significantly for the purposes of the current applications, the majority of the Court of Appeal made it clear that the potential for future rivalry between the parties is also a relevant consideration.
28 In the 24 August ruling, I considered the extent of trade rivalry between Fonterra and Bega. At that time, the evidence was that Bega was a relatively minor competitor of Fonterra in the market for branded cheese sold through supermarkets, through its ‘Dairylea’ brand, and a relatively minor competitor in the food services business. While there are some restrictions on Bega’s ability to compete with Fonterra in the private label market, Bega in fact has a significant share of this market. I held that:
While I accept Bega’s submissions to the effect that the degree of trade rivalry between Bega and Fonterra has been somewhat overstated by Fonterra, I also note that this position could change in the not too distant future. At the very least, the fact of this litigation and the nature of the issues in this proceeding indicate that the commercial relationship between Fonterra and Bega has soured.
29 Earlier in the 24 August ruling, I noted Fonterra’s submissions concerning the potential for trade rivalry in the future. Senior counsel for Fonterra submitted that:
… since Bega’s purchase of Mondelez some eighteen months ago, Bega has signalled a new commercial direction, publicly announcing plans to build more factories to produce more cheese.
30 Accordingly, given that I accepted that there was some degree of trade rivalry between Fonterra and Bega, and that the confidential information was commercially sensitive to Fonterra, I determined to put in place a confidentiality regime with different tiers of confidential information, with different classes of people having access to different categories of confidential information, informed by the relevance of the information to the issues in the proceeding, the sensitivity of the information, and the need for G + T and counsel and experts retained by Bega to obtain necessary instructions.
31 As noted above, since the 24 August ruling, there have been certain developments. First, Bega has issued the breach notice, the validity of which is now being challenged by Fonterra in the 2019 proceeding, which has been consolidated with this proceeding. By reason of the Further Amended Statement of Claim filed in this proceeding by Fonterra on 8 March 2019, the allegations in the 2019 proceeding have been incorporated in the Further Amended Statement of Claim.
32 I can safely infer from the issue of the breach notice that Bega wishes to terminate the TMLA, or at least have that option open to it. Accordingly, if Bega is successful in defending the validity of the breach notice, there is a real prospect that the commercial relationship between Bega and Fonterra will come to an end. Alternatively, it is not outside the realms of possibility that any commercial settlement of the disputes in this proceeding will involve a dissolution of the commercial relationship between the parties. Either way, presumably Bega will wish to sell the cheese it produces, and will seek to use the Bega brand to do so. If that were to occur in, say, 2019 or 2020, Bega would be a direct and substantial competitor of Bega in both the branded cheese and food service markets in the near future. Accordingly, the prospect of there being a trade rivalry between Fonterra and Bega of some great magnitude is very real, and could take place quite soon.
33 Further, the uncontested evidence of Mr Lees shows that Bega has launched cream cheese and butter products under the ‘Farmer’s Table’ brand, which are sold in supermarkets. ‘Farmer’s Table’ butter products are located adjacent to Fonterra’s ‘Western Star’ butter products in supermarket dairy cabinets. Further, there is evidence that Bega plans to launch two parmesan cheese products under the ‘Farmer’s Table’ brand in May 2019, which will compete with Fonterra’s ‘Perfect Italiano’ parmesan cheese products in supermarkets. There is also evidence that Bega branded mozzarella cheese products are being sold in the food service distribution channel, in competition with Fonterra’s ‘Perfect Italiano’ mozzarella cheese products. Finally, while this evidence is disputed by Bega, and said to be unreliable as being fourth hand hearsay, Fonterra contends that Bega is planning to launch natural cheese slices, block cheese, and grated cheese products under the ‘Farmer’s Table’ brand.
34 Accordingly, even if I were to discount the evidence that Bega plans to launch products under the ‘Farmer’s Table’ brand which would directly compete with Bega branded products and other products marketed by Fonterra, it is apparent that there has been a significant shift in the commercial landscape over the past six months, such that not only has the trade rivalry between Fonterra and Bega intensified, the likelihood of that rivalry intensifying further in the near future has also increased. It is against that backdrop that Bega’s application to amend the terms of the confidentiality regime ought to be approached.
35 I turn now to the specific applications made by Bega to vary the confidentiality regime.
36 In relation to the application to amend the terms of the confidentiality regime to relieve G+T of the obligation to send ABL copies of confidentiality undertakings executed by lawyers as they join the team, this issue was first raised in December 2018. While during the course of the hearing on 20 December 2018 I indicated that I was not satisfied that there was any pressing need to change the confidentiality regime, particularly given that the urgency of the matter had fallen away with the adjournment of the trial, it is fair to say that this matter was a lower order issue at that time, and was not the subject of a great deal of attention.
37 Essentially, the resolution of this issue requires the balancing of the prejudice, or the potential prejudice to each party of changing the existing regime, this aspect of which was agreed between the parties many months ago. Bega’s application is pressed on two bases: first, it says that the refusal of Fonterra to consent to Mr Ferguson having access to the confidential information has meant that he has been unable to provide assistance to Bega in this proceeding. In other words, Fonterra has used this process to deny access to highly relevant information to one of Bega’s key legal advisors. In her affidavit sworn on 5 March 2019, Ms Whiting deposed that she did not consider that it was appropriate for ABL to be deciding which of Bega’s legal advisors could access Fonterra’s confidential information.
38 Fonterra relied upon my rejection of Bega’s application to vary the confidentiality regime on 20 December 2018 in support of its opposition to the current application. Fonterra also relied upon the ongoing dispute between the parties in support of its contention that the confidentiality regime is working exactly as intended: that is, the process enables Fonterra to raise appropriate queries regarding the potential recipients of confidential information.
39 In my view, there remains no pressing need to alter the terms of the confidentiality regime in the manner sought by Bega. The actual effort which needs to be expended to send copies of signed confidentiality undertakings to ABL is minimal, and as such amounts to a minor inconvenience only. The real issue is whether the current process, whereby Fonterra should be able to in effect vet the legal advisors who are able to inspect Fonterra’s confidential information is necessary to protect Fonterra’s legitimate interests in protecting its confidential information, or whether it is unduly prejudicial to Bega. With some hesitation, I consider it appropriate to maintain the status quo. First, while the dispute between Fonterra and Bega will be resolved at least partially in favour of Bega, Fonterra’s concerns regarding Mr Ferguson’s involvement in the litigation were not frivolous or far‑fetched, and it would not have been possible to raise these concerns had it not been aware of Mr Ferguson’s involvement in the proceeding. Secondly, given that members of the legal profession can be quite mobile in their employment, it seems to me to be appropriate for Fonterra to be aware of what information lawyers have had unrestricted access to in real time, rather than at the end of the proceeding, which, depending upon any appeal or appeals, may be some years away.
40 Finally, in reaching this view, I am conscious of my conclusion that Fonterra and Bega are trade rivals, and indeed, the commercial rivalry between them has escalated further over the course of this proceeding, and may well continue to escalate in the not too distant future. It is against this backdrop that a more cautious approach is to be preferred against a more liberal approach, at least in the absence of very specific evidence of direct prejudice to Bega.
41 The foregoing is also relevant to the question of whether the confidentiality regime should be amended to enable unrestricted access to Fonterra’s confidential information to any external lawyer engaged by Bega. This modification is sought to be made to facilitate access to confidential information by Mr Ferguson, at least in the first instance.
42 In order to consider the position of Mr Ferguson, it is necessary to turn to the evidence in some detail.
43 Originally, Bega sought that Mr Ferguson, who is a partner with Addisons Lawyers, have access to confidential information on the same terms as selected Bega senior executives: that is, he would be entitled to inspect Category B and Category C information in addition to all other discovered documents. In her affidavit sworn 5 March 2019, Ms Whiting described Mr Ferguson as a ‘key legal advisor’ to Bega, who is ‘assisting in the representation of Bega in the proceeding’. Further, it is apparent from other evidence filed in the proceeding that Mr Ferguson represented Bega in its negotiations with Fonterra in 2001 regarding the parties’ entry into the TMLA.
44 In his affidavit sworn on 8 March 2019, Mr Lees deposed that:
(a) Fonterra did not consent to Mr Ferguson being granted access to its confidential documents;
(b) G+T has not explained the nature of Mr Ferguson’s assistance, why that assistance was necessary or why that assistance required him to have access to Category B information;
(c) Mr Ferguson’s online professional profile states:
I am treated by my clients, and I see myself, as part of their management team. This means close liaison with directors and executives and regular visits to both their corporate headquarters and operational facilities.
(d) the profile also includes the following endorsement from Bega’s Chairman, Mr Barry Irwin:
David Ferguson has helped Bega Cheese over many years to develop and grow our business, culminating in our recent IPO and ASX listing. His expertise and understanding of our business ensures that we receive legal services that help us get things done;
(e) he deposed as to there being recent correspondence between ABL and G+T in which ABL asserted that communications between Mr Ferguson and Bega regarding the TMLA negotiations were not protected by legal professional privilege by reason of s 125 of the Evidence Act 2008 (Vic), commonly known as the ‘fraud exception’. However, Fonterra’s challenge to Bega’s claim for privilege over part of the TMLA negotiation documents is not the subject of any application by Fonterra at this stage.
45 At the hearing on 12 March 2019, I indicated that, in order to assess whether Mr Ferguson should be able to have access to Fonterra’s confidential information, I would need further evidence regarding the role to be played by Mr Ferguson in the proceeding. By this time, Bega’s position had shifted: rather than seeking that Mr Ferguson have access to confidential information on the same terms as the Bega executives, who are Category B recipients, Bega sought that Mr Ferguson have completely unrestricted access to the confidential information.
46 Following the hearing on 12 March 2019, Ms Hilliard of G+T swore an affidavit on 15 March 2019. She deposed, in summary, as follows:
(a) Mr Ferguson is admitted to practise in New South Wales and Victoria;
(b) prior to joining Addisons Lawyers he was a partner at Abbott Tout and Dibbs Barker, having become a partner at Abbott Tout in 1987. He advises in the area of corporate and commercial law, and mergers and acquisitions. Bega is one of his numerous clients;
(c) Mr Ferguson has given and abided by numerous undertakings to the Court, and is well aware of his duties to his clients and the Court; and
(d) he does not owe any fiduciary duty to Bega above and beyond the ordinary fiduciary duties owed by an external lawyer to a client.
47 In relation to Mr Ferguson’s role in providing legal advice to Bega over the years, Ms Hilliard deposed as follows:
I am informed by Mr Ferguson and I believe that:
(a) he has advised Bega in the capacity of external legal advisor since shortly after becoming a partner at Abbott Tout in or around 1987;
(b) in his role as Bega’s external legal advisor he provides legal advice to Bega in relation to transactional matters in which Bega is involved and contracts to which Bega is a party;
(c) he has provided legal advice to Bega in relation to a number of major transactions, but in no sense has he ever been involved in Bega’s corporate decision-making, whether operational, marketing or otherwise;
(d) Mr Ferguson has on occasion been present at Bega board meetings for the purposes of providing legal advice to the board. Generally this occurs no more than 2-3 times a year, in relation to matters such as significant changes to the business (e.g. the change from cooperative to company), or in relation to particular transactions in which Mr Ferguson has advised. However, he has never taken part in any decision‑making by the board and, as a general rule, would not be present during the part of such meetings where business decisions are taken;
(e) Bega Foods has its own in-house counsel. Mr Ferguson is instructed by Bega Food’s in-house counsel in relation to matters relevant to Bega Foods. Mr Ferguson also receives instructions from Bega executives, including the company secretary and the CEO. If Mr Ferguson is advising on a particular deal or contract, for example the purchase of a new machine, he might receive instructions from the personnel within Bega who is leading the deal or project. However, in such circumstances, Bega’s in-house counsel or executives would also be aware of the instruction and Mr Ferguson’s involvement.
48 Further, in relation to the nature of Mr Ferguson’s role in providing legal advice to Bega in relation to this proceeding, Ms Hilliard deposed as follows:
Bega is entitled to obtain legal advice from whosoever it chooses. Bega has instructed G+T to act for it in this proceeding. However, Bega is entitled to continue to seek legal advice and input from its longstanding external legal advisor, and has chosen to do so.
Bega is not obliged to disclose the exact nature of Mr Ferguson’s advice. Such disclosure may lead to waiver of privilege or to disclosure of Bega’s approach to this proceeding.
However, at a general level, I am informed by Mr Ferguson and believe that he advises Bega in relation to this proceeding from the perspective of a person who understands Bega’s business and is also aware of the background and chronology of the relationship between Bega and Fonterra. For example, Mr Ferguson was involved in the negotiation of the Trade Mark Licence Agreements and accordingly is able to provide assistance in relation to historical documents and events relating to those agreements.
Mr Ferguson’s knowledge of the history of dealings between Fonterra and Bega enables him to understand the significance of both historic and contemporary documents more readily than other advisors. He understands the history of the marketing relationship between Bega and Fonterra and can contextualise information about that relationship (e.g. Marketing activities undertaken by Fonterra in relation to the Bega brand) within the framework of Fonterra’s obligations under the Trade Mark Licence Agreements.
Further, Fonterra has discovered a large number of confidential documents. In paragraph 56 of Mr Lees’ affidavit of 8 March 2019, he states that Fonterra have claimed confidentiality over a further 1,597 documents. Highlighted or redacted versions of those documents are yet to be provided. When they are provided, Mr Ferguson should be able to assist in the review of such documents and provide advice on their contents to Mr Hampson, Mr Griffin and Mr van Heerwaarden.
From my own experience in dealing with Mr Ferguson in relation to this proceeding, I consider him to be performing the role of an external legal advisor to Bega and not a role analogous to that of an in-house counsel. In particular, Mr Ferguson does not provide instructions to G+T as to the conduct of this proceeding as a representative of Bega, and is not treated by G+T as a de facto in-house counsel for Bega. However, Mr Ferguson plays a useful role in assisting G+T as and when requested.
49 Ms Hilliard also deposed that the three particular concerns identified by Mr Lees in his affidavit of 8 March 2019 (see paragraph 72 of these reasons) relate to matters entirely outside Mr Ferguson’s role as Bega’s external legal advisor. In particular:
(a) Mr Ferguson has no involvement in, and has never had any involvement in, any decisions within Bega as to the prices at which products are offered to retailers;
(b) Mr Ferguson has no involvement in, and has never had any involvement in, decisions within Bega as to whether it should compete, and the price at which it should compete against Fonterra in the private label arena; and
(c) Mr Ferguson has no involvement in, and has never had any involvement in any decisions within Bega regarding the price offered by Bega to farmers for raw milk.
50 Further, Ms Hilliard exhibited a copy of Fonterra’s latest annual report, which she said shows that information regarding the profitability of Fonterra’s business is publicly available.
51 Following the filing and service of Ms Hilliard’s affidavit on 15 March 2019, both parties filed and served written submissions on the question of whether Mr Ferguson should be granted access to Fonterra’s confidential information. Bega submitted, in summary, as follows:
(a) it is inappropriate for ABL to have the ability to monitor and control which external solicitors Bega engages for the purpose of this proceeding;
(b) the evidence supports the proposition that Mr Ferguson is truly an external legal advisor, and as such, there is no principled basis upon which any external legal advisor could be excluded from having access to documents under the confidentiality regime;
(c) the evidence contradicts Fonterra’s submission that Mr Ferguson’s role is akin to that of an in‑house counsel;
(d) the considerations relevant to the determination of whether a party’s in‑house counsel ought have access to confidential documents do not apply in the current case, because Mr Ferguson owes no fiduciary duty to Bega equivalent to what would be owed by an employee. In any event, it is relatively rare for the courts to refuse access to confidential documents by an in‑house counsel;
(e) allowing Mr Ferguson access to confidential documents is consistent with the Bega executives having access to confidential documents, as the Bega executives:
are of such seniority such as to be of sufficient distance from operational matters to limit the risk of any inadvertent use of confidential information;
(f) as Mr Ferguson does not participate in any decision-making within Bega, and his role is confined to the provision of legal services, the Court can be satisfied that the risk of inadvertent disclosure is low;
(g) denying access to confidential documents by Mr Ferguson causes and will cause significant unfairness to Bega. Allowing Mr Ferguson to have access to such information is important given ‘Mr Ferguson’s involvement in the negotiation of the TMLA and his ability to advise Bega in relation to the significance of documents pertinent to the marketing relationship between Bega and Fonterra’;
(h) all of the matters referred to by the majority of the Court of Appeal in Cargill as providing confidence in permitting external lawyers having access to the confidential documents of the other party (such as being subject to the disciplinary procedures of the Court) apply to Mr Ferguson; and
(i) it is apparent from the decision in Cargill that there is no ‘middle land’ between external lawyers and in‑house counsel. The distinction between them arises out of the potential for conflict between an internal lawyer’s duty to the Court and the duty owed by an employee to advance their employer’s commercial interests. No such conflict arises in the case of Mr Ferguson.
52 Fonterra maintained its opposition to Mr Ferguson having access to confidential information. Fonterra submitted, in summary, as follows:
(a) Ms Hilliard’s evidence does not support any variation to the confidentiality regime that would entitle Mr Ferguson to have access to the confidential information;
(b) the orders sought by Bega would extend access to the confidential documents not only to Mr Ferguson, but to any admitted legal practitioner engaged by Bega;
(c) the question is not whether Bega is entitled to obtain legal advice from whomever it chooses, but rather whether the confidentiality regime should be varied to permit Mr Ferguson to have access to confidential information;
(d) Bega has not been frank with the Court about the degree of trade rivalry between Bega and Fonterra. This is a critical issue in determining who should have access to confidential information;
(e) Fonterra submitted as follows:
… Mr Ferguson is a trusted advisor to Bega who advises the Board and senior management on matters of significant business and strategic importance and that he is intimately familiar with Bega’s business, including their ‘growth strategies’. He has performed this role over many years and can be expected to do so into the future.
He is a corporate, commercial and mergers and acquisitions lawyer. He is not a litigator. He has advised Bega since about 1987, including in relation to the TMLAs in 2001. He attends board meetings 2-3 times a year. His role is such that he understands the history of the marketing relationship between Bega and Fonterra, including the marketing undertaken by Fonterra in relation to the Bega brand. This is consistent with his website profile statement that ‘it is important to understand everything from the production process through to the supply chain associated with product sales.’
The Confidential Information includes highly commercially sensitive financial and marketing information, including, for example, the gross margin by product in Woolworths, the amount of trade spend, and current information concerning new product development and strategic plans. This information would be of great commercial value to Bega in considering whether to launch products, in competition with Fonterra and in negotiating pricing for such products with supermarket retailers. It is information of a nature that once learned cannot be forgotten. (citations omitted)
(f) while Mr Ferguson is apparently not involved in management decisions, he is a trusted commercial legal advisor of long standing, and owes fiduciary duties to Bega;
(g) the evidence does not establish that Bega needs Mr Ferguson to have access to the confidential information in order for Bega to properly prepare its case. At the hearing giving rise to the 24 August ruling and the 21 September orders, there was no suggestion that Bega could not properly prepare without the assistance of Mr Ferguson. Mr Ferguson will be able to inspect the overwhelming majority of Fonterra’s discovered documents. There is no evidence that Mr Ferguson needs, or would be assisted by, having access to the confidential information or any of it;
(h) the evidence regarding Mr Ferguson’s role in advising Bega in relation to this proceeding is vague, general, and speculative. The confidential information is irrelevant to Mr Ferguson’s ability to ‘provide assistance in relation to historical documents and events relating to [the TMLA]’; and
(i) the publicly available financial information provided in Fonterra’s annual report is irrelevant to the issues in this proceeding.
53 A key issue for determination in this application is whether, in determining appropriate access to confidential information, there is a ‘bright line’ dividing external lawyers engaged by a party, and in‑house counsel employed by a party. Bega submits that there is such a bright line, and as an external lawyer, Mr Ferguson should have unrestricted access to the confidential documents, on the same terms as members of and lawyers employed by G+T and counsel retained by Bega who have signed confidentiality undertakings.
54 The issue of the different status of in‑house counsel and external lawyers was also considered by the Court of Appeal in Cargill. The relevant passages of the majority judgment, which drew heavily upon the decision of the Court of Appeal in Mobil Oil Australia Ltd v Guina Developments Pty Ltd, (‘Mobil Oil”) are extracted below (omitting citations):
There are no fixed rules about the class of persons who are authorised to have access to confidential discovered documents or the terms of any confidentiality undertaking to be given by them. However, where the parties are trade rivals and the confidential discovered documents relate to intellectual property or other business matters which are of commercial interest to the party to whom the documents are discovered, it is ‘commonplace’ for access to those documents to be limited to the solicitors and counsel acting for that party in the proceeding – who necessarily are admitted to practice in the jurisdiction in which the proceeding is being conducted – and independent experts.
Courts have confidence in permitting the solicitors and counsel for an opposing party to have access to confidential discovered documents because they are officers of the court. As such, they owe duties to the court which override their duties to their client. They have powerful incentives to comply with the terms of any confidentiality undertaking they give to the court because they may be subject to three types of sanctions if they breach the undertaking.
The first sanction is professional disciplinary action by the court or a legal regulatory authority, including the ultimate sanction of being struck off the roll of practitioners. The second sanction is punishment for contempt of court, which may include a custodial sentence. The third sanction is an award of damages for any loss that is suffered as a result of the breach of the undertaking if the elements of a breach of confidence or another cause of action can be established.
Courts have confidence in permitting independent experts to have access to confidential discovered documents because they are bound by the Expert Witness Code of Conduct which provides that they are not an advocate for a party and have a paramount duty to the court – which overrides any duty to the party retaining them – to assist the court impartially. Further, independent experts have no personal interest in the contents of documents and may be subject to the contempt of court and damages sanctions.
Courts are less confident about including employees of the opposing party in the disclosure class. This is because the relevance of the confidential documents to the commercial interests of that party, and the employees’ duties to that party to advance those interests, create risks of use or disclosure of the contents of the documents. Even if such use is subconscious rather than conscious and such disclosure is inadvertent rather than deliberate, the harm to the commercial interests of the party providing discovery would be the same.
The above concerns about the inclusion of employees of the opposing party in the disclosure class are heightened by the fact that, with one exception, such employees are not subject to the professional disciplinary sanction. The damages sanction is unlikely to be of much utility if the employee does not have sufficient assets to meet a damages award.
The exception relates to an employee who is admitted as a lawyer in the jurisdiction in which the litigation is being conducted. As a lawyer, the employee would be liable to the professional disciplinary sanction if he or she breaches an undertaking given to the court. However, whether there is any need to include an internal lawyer of a party in the disclosure class where the external lawyers of that party are already in that class, will depend on the role, expertise and experience of the internal lawyer.
Where the internal lawyer acts as a mere conduit for conveying communications between the external lawyers and the party, there would not be any need to include the internal lawyer in the disclosure class. Likewise, where the internal lawyer performs an identical role to the external lawyers, namely, the provision of advice and recommendations about the conduct of the proceeding, there may not be any need to include the internal lawyer in the disclosure class. This is particularly so because, as an internal lawyer is embedded in the organisation of which he or she is an employee, there is a greater risk of inadvertent use or disclosure of the contents of the confidential documents.
On the other hand, where an internal lawyer has qualifications and experience that are relevant to the specific subject matter or any technical features of the confidential discovered documents, he or she may be particularly well placed to contribute to the conduct of the proceeding and its possible resolution. That might be the case, for example, where the parties to a breach of patent dispute are competitors in the pharmaceutical industry and the defendant’s internal lawyer is also a qualified patent attorney.
Similarly, where an internal lawyer is a senior employee of a party, has an intimate knowledge of the party’s business and its commercial and litigious strategies and is a trusted advisor to the party’s management and board of directors, he or she may be able to contribute to the party’s decision-making in relation to a proceeding in a manner that external lawyers cannot. This would be particularly so where the internal lawyer is a member of the executive team of his or her company. However, while such an internal lawyer can clearly perform a more enhanced role in relation to the giving of instructions concerning the conduct of litigation, his or her involvement in the making of commercial decisions poses greater potential risks if he or she were to be included in the disclosure class.
55 In the last paragraph of the passage extracted above, the majority echoed a dilemma referred to by Gyles J in C7 Pty Ltd & Anor v Foxtel Management Pty Ltd and ors, where his Honour stated:
… The problem in the present case is acute. Those best placed to both understand and interpret the material and also make an informed decision as to litigation on the part of the applicants are those persons which have the best overall knowledge of the industry as a whole and of the strategy of Seven Network Ltd in relation to it. They are the persons to whom information about competitors and potential competitors would mean most and be most useful.
56 In my view, there is no bright line between external solicitors on the record in a proceeding and internal lawyers employed by a party for the purposes of the current application. All that can be inferred from the authorities, including Cargill, is that in fashioning an appropriate confidentiality regime, different considerations apply to internal counsel, in part by reason of the conflicting duties owed by an internal lawyer to their employer and the Court, and in part because they may not be amenable to the full range of disciplinary sanctions able to be imposed upon external lawyers in the jurisdiction in which the proceeding is conducted. However, the authorities make it clear that any orders for a confidentiality regime ‘are fashioned to meet the circumstances of the case’ and ‘there are no fixed rules about the class of persons who are authorised to have access to confidential discovered documents on the terms of any confidentiality undertaking to be given by them’. While it is commonplace for access to confidential documents to be given to the solicitors on the record and counsel acting for a party in a proceeding, it is also commonplace for that access to be limited to specified individuals: for example, particular members and employees of a firm of solicitors, rather than all members or employees of the firm on the record at large. Accordingly, the fact that Mr Ferguson is an external lawyer retained by Bega does not confer upon him an automatic right to have unrestricted access to the confidential documents.
57 I accept unreservedly the evidence to the effect that Mr Ferguson is a solicitor of long standing and has an unblemished record, that he fully understands the import and effect of giving a confidentiality undertaking, and that he is fully cognisant of his duties to the Court. I do not consider for a moment that Mr Ferguson would intentionally, or even carelessly, breach any undertaking given by him.
58 However, Bega’s application to enable Mr Ferguson to have access to all confidential documents, including Fonterra’s financial information, which I found in the 24 August ruling to be ‘generally of tangential relevance to the issues in the proceeding, while being highly sensitive from Fonterra’s perspective’, needs to be considered in the broader context. I have found that the degree of trade rivalry between Fonterra and Bega has intensified over recent months, and may well intensify further in the near future. That may well occur in the context of a significant alteration in Bega’s commercial arrangements, and in particular, its commercial relationship with Fonterra. It is not beyond the realms of possibility that Bega will seek to resume control of the Bega brand, and/or launch new products which may compete with Bega branded and other Fonterra cheese products. In the event that there is such a change in the commercial landscape, it may well be that Bega will continue to seek advice from Mr Ferguson, a long standing and trusted legal advisor, on significant commercial matters, including changes in its business models and commercial partnerships, both in the context of the current litigation and in its wake. There is no evidence before me that Mr Ferguson will not be retained by Bega in the future: indeed, I can infer that he will be on occasion during the course of his professional life.
59 When a legal practitioner is instructed by their client to sign a confidentiality undertaking of the kind provided by Bega’s legal advisors in this proceeding, in effect, the client is consenting to that legal practitioner being relieved of their obligation not to withhold information received in the course of their retainer for the benefit of their client, to the extent that the information is received pursuant to that undertaking. While this may cause practical difficulties for the lawyers and clients concerned during the course of the relevant litigation (as ventilated on occasion by Bega’s solicitors during the course of the proceeding), those practical difficulties are unlikely to have any ongoing effect once the proceeding has been concluded. The external solicitors and counsel move on to the next case, no doubt putting to one side any confidential information and/or trade secrets they may have learnt during the course of the proceeding, and the client continues to conduct its business unaware of the content of the confidential information.
60 However, in the current case, Mr Ferguson is a transactional lawyer, not a litigation lawyer. He is unlikely to ‘move on’. It is unclear what role he is playing in the current proceeding, because Bega has elected not to disclose this except in the most general terms, but I expect that his long experience in providing legal advice to Bega on key business strategic and commercial decisions is at least one basis for retaining him in relation to this proceeding. I would not be prepared to dismiss his statement in his online profile that ‘I am treated by my clients, and I see myself, as part of their management team’ as mere puffery. I presume that one of the strengths that Mr Ferguson brings to his legal practice is his willingness and ability to embed himself within the commercial decision making process of his clients over a lengthy period of time. No criticism is made of him, or transactional lawyers generally in that regard, but it is a materially different role to that generally played by litigation lawyers. The likely ongoing relationship between Mr Ferguson and Bega, and the potential scope of that relationship, means that the practical consequences of the undertaking will continue well into the future.
61 Accordingly, it is appropriate to consider Mr Ferguson’s position separately from that of the solicitors on the record, and counsel retained by it in this proceeding. Having done so, I will order that, subject to there being liberty to apply, Mr Ferguson be added to the class of Category B recipients. The effect of this will be that Mr Ferguson will be entitled to inspect all confidential information which is able to be disclosed to the Bega executives, but not Category A information.
62 Category A information includes, subject to the resolution of Bega’s other applications, some of Fonterra’s key financial information (profit, contribution margin, gross margin, adjusted gross margin, earnings before interest and taxes, and contributions to earnings before interest and taxes). I understand that the financial information is presented in such a way as to be referrable to particular product lines. Category A information also includes new product development plans, food services strategies, and private label strategies. While the information in the latter category is highly relevant to the issues in this proceeding, it is also information that goes to the heart of Fonterra’s business. As indicated in the 24 August ruling, I am not convinced that the Category A financial information is of critical relevance to the issues in the proceeding, and I have not been persuaded to depart from that view to any great extent.
63 I accept that at least some of the Category A information is, for present purposes, relevant to the issues in the proceeding. I also accept that at least some of the Category A information would be difficult to forget, although memories do fade over time. As noted earlier, I do not consider that there is any risk that Mr Ferguson would deliberately disclose confidential information to Bega. The real concern is the risk of inadvertent disclosure, and the risk that Mr Ferguson’s knowledge of the confidential information may unconsciously inform or flavour the advice given to Bega by him concerning commercial transactions in the future, to Fonterra’s potential detriment. It was for that reason that inspection of this information was withheld from the Bega executives.
64 This risk must be balanced against the potential prejudice to Bega of Mr Ferguson not being able to inspect all of the confidential information, that is, the Category A information. However, there is nothing in the evidence relied upon by Bega (which bears the burden of persuasion in this application) that convinces me that Bega will be prejudiced if Mr Ferguson is not able to inspect Category A information. To the extent that Category A information is directly relevant to the issues in the proceeding, it will no doubt be the subject of commentary and opinion by the experts engaged by Bega in this proceeding. Mr Ferguson is a lawyer, not a business analyst or a marketing expert. Ms Hilliard’s evidence is that he does not provide instructions to G+T regarding the conduct of this proceeding on behalf of Bega. As a Category B recipient, he will be able to see all documents concerning the marketing of Bega branded and other Fonterra products. As a Category B recipient, he will be able to discuss these documents and certain financial information of Fonterra with Bega’s external lawyers, experts, and senior executives.
65 Of course, I will reserve liberty to apply, so that if circumstances change, or it becomes clear to Bega and G+T that the limited restrictions upon Mr Ferguson are unduly burdensome, Bega can return to Court to vary the confidentiality regime.
66 Bega also applies for a further modification of the confidentiality regime in order to:
(a) delete information relating to ‘Fonterra’s profit, contribution margin, gross margin, adjusted gross margin, earnings before interest and taxes, and contribution to earnings before interest and taxes’ (‘sensitive financial information’) from ‘Protected Information’ to include this within Category B information (thus enabling inspection of this information by the Bega executives);
(b) limit the restriction in Category A to new product development plans for non‑Bega branded products; and
(c) limit the restriction in Category C to marketing plans going forward for non‑Bega branded products.
67 The consequence of the proposed amendments referred to in (b) and (c) above is that there would be no limitation on the personnel who would be able to inspect marketing plans going forward and new product development plans for Bega branded products, save that the documents discovered by Fonterra would be protected by the Harman undertaking. Bega’s application in relation to these two categories of documents will be dealt with together in these reasons.
68 Bega relied upon the affidavits sworn by Ms Whiting on 5 March 2019 and Ms Hilliard sworn on 8 March 2019 in support of is application with respect to the sensitive financial information. In her affidavit sworn on 5 March 2019, Ms Whiting deposed that there are some inconsistencies in the redaction of sensitive financial information, such that the Bega executives have been able to inspect some sensitive financial information in some documents, but the same information is redacted in other documents. Ms Whiting also deposed as follows:
Further, it has become increasingly clear that the current categorisation of Financial Protected Information as Category A information is hindering my ability to obtain complete instructions in relation to the relevant figures. It is simply not possible for me to fully understand the significance of the Financial Protected Information without the ability to seek instructions.
69 In her affidavit sworn on 8 March 2019, Ms Hilliard noted that the Bega executives cannot inspect information regarding Fonterra’s gross margin. She deposed as follows:
I am instructed by Adam McNamara, Executive General Manager at Bega Foods (the division of Bega that, amongst other things, Bega’s Bega-branded products such as peanut butter), and I believe that Bega Foods takes into account the gross margin on a product when deciding the amount that should be spent on marketing that product.
The products marketed by Bega Foods include peanut butter. I am instructed by Mr McNamara that peanut butter is in the ‘fast moving consumer goods’ (FMCG) category. My understanding is that the cheese products sold by Fonterra under the Bega, Mainland and Perfect Italiano brands are also in the FMCG category.
Accordingly, I consider that the gross margin for each of Fonterra’s cheese products is a highly relevant piece of information when considering whether the marketing spend for those products is adequate, reasonable and/or in accordance with the Plaintiffs’ obligations under the Trade Mark Licence Agreements.
As noted above, the authorised Bega Executives are not permitted to inspect information regarding the Plaintiffs’ gross margins. As such, they are not in a position to instruct G+T as to whether the marketing spend for Fonterra’s cheese products is what they would expect based on the gross margin, or to provide any other relevant instructions in respect of the interaction between the Plaintiffs’ gross margins and its marketing spend or approach to marketing more generally.
70 In his affidavit sworn on 8 March 2019, Mr Lees deposed, in summary, as follows:
(a) he referred to the 24 August ruling, where I stated:
The financial information of Fonterra is generally of tangential relevance to the issues in the proceeding, while being highly sensitive from Fonterra’s perspective,
(b) any change to the categorisation of Fonterra’s confidential financial information would require approximately 200 documents to be reviewed again and the redactions revised; and
(c) he deposed as follows:
I am instructed by Mark Conway, the Plaintiffs’ General Manager – Strategic Projects, that:
(a) the Protected Financial Information is highly sensitive information that is not public, that senior representatives of a competitor such as the Defendant are unlikely to forget and that would give the Defendant an unfair commercial advantage in its dealings with customers (retailers of dairy products) and dairy farmers;
(b) for example:
(i) knowing which products the Plaintiffs were making profits on, and their level of profit on those products, would enable the Defendant to offer more attractive prices to retailers and potentially take limited shelf space in supermarkets away from the Plaintiffs’ products;
(ii) knowing the profitability of the Plaintiffs’ private label arrangements with retailers would enable the Defendant to understand whether it should compete, and the price at which it should compete, against the Plaintiffs for such arrangements; and
(iii) knowing the profitability of the Plaintiffs’ business generally would enable the Defendant to understand the Plaintiffs’ ability to respond to the Defendant offering higher raw milk prices to farmers that currently supply the Plaintiffs.
71 In his affidavit sworn on 12 March 2019, in response to Ms Hilliard’s affidavit of 8 March 2019, Mr Lees deposed as follows:
ln paragraph 10 of Ms Hilliard's affidavit she states her instructions and belief that Bega Foods (a division of the Defendant) ‘takes into account the gross margin on a product when deciding the amount that should be spent on marketing that product.’
I am instructed by Kiril Simonovski (the Plaintiffs' Director, Sales & Marketing (Consumer)) that marketing spend is sometimes expressed as a percentage of net sales value (NSV) but not, in his experience, as a percentage of gross margin.
NSV is a measure of revenue, not profit or margin.
NSV/sales revenue is not Category A Information under the Confidentiality Orders made by the Honourable Associate Justice Daly on 21 September 2018.
Sales revenue is included in the proposed financial template I provided to G&T on 30 November 2018.
Now produced and shown to me and marked ‘MDL-74’ are copies of:
(a) Extracts from the CMO (Chief Marketing Officer) Survey dated February 2018 conducted by the global accounting firm Deloitte, the Fuqua School of Business at Duke University in the USA and the American Marketing Association;
(b) A Forbes Media article dated 27 July 2018; and
(c) The results of a Google internet search that I conducted.
The CMO Survey and article referred to above discuss advertising spend as a percentage of revenue and, in the CMO Survey, as a percentage of firm budget, not gross margin.
72 The evidence concerning the extent of trade rivalry between Fonterra and Bega is also relevant to the determination of this issue.
73 I am not satisfied, in all of the circumstances, that there needs to be a variation in the confidentiality regime in the terms sought by Bega, insofar as it concerns Fonterra’s financial information. First, there is no explanation why the need for the Bega executives to review the Category A financial information, as referred to in Ms Hilliard’s affidavit of 8 March 2019, was not drawn to the attention of the Court prior to the making of the 21 September orders. While not determinative of the matter, the failure to raise the issue at that time does suggest that the current application is something of an afterthought.
74 Further, even if the gross margin realised by Fonterra in respect of its products is a relevant matter to determining what is a reasonable amount to spend on marketing and promotion of those products, it seems to me that this question will ultimately be largely a matter for expert opinion. While I could be persuaded in the future that it is necessary for the Bega executives (and Mr Ferguson) to see the Category A financial information, I am not so persuaded at present, particularly in the context of my finding that the degree of trade rivalry between Fonterra and Bega has intensified over recent months, and is likely to intensify further in the near future.
75 Bega also seeks that the confidentiality regime be varied in order to remove documents concerning new product development and marketing and promotional campaigns for Bega branded products from the confidentiality regime. Bega relies upon clause 6.2 of the TMLA, which provides as follows:
[Fonterra] must:
(a) twice annually inform Bega of [Fonterra’s] existing and proposed promotional, marketing and advertising activities associated with the sale of Branded Products in the Territory; and
(b) allow Bega to have access on reasonable commercial terms to any promotional, marketing or advertising material from time to time produced by or at the request of [Fonterra] in relation to [Fonterra’s] sale of Branded Products in the Territory for use by Bega in promoting the sale of Branded Products outside the Territory.
76 In short, Bega submits that, given that the TMLA provides Bega with a right of access to marketing and promotional information regarding Bega branded products, Bega need not be inconvenienced and/or prejudiced by having access to such material restricted by the confidentiality regime.
77 I disagree with Bega’s interpretation of clause 6.2 of the TMLA. First, clause 6.2(a) contemplates a formal, scheduled reporting process whereby Fonterra presents information regarding planned promotional and marketing campaigns to Bega. It does not contemplate an ongoing feed of such information as required by Fonterra’s ongoing discovery obligations. Secondly, it does not require Fonterra to provide information to Bega regarding new product development plans for Bega branded products, although one might expect that Fonterra would consult with Bega about such matters in the ordinary course of business, given that before developing new products, Fonterra would need to be satisfied that Bega had the capacity to manufacture these products.
78 Further, clause 6.2(b) of the TMLA offers no assistance to Bega in this application either. Read as a whole, and having regard to the expressed purpose of this clause (to enable Bega to use promotional material to promote Bega branded products outside the geographical area covered by the TMLA) the ‘material’ referred to in this clause must be actual promotional material and marketing collateral (posters, packaging etc), rather than the underlying plans to produce such material.
79 That said, I agree that, given that Fonterra would need to consult with Bega about new product development plans in any event, and given that these documents are of substantial relevance to the issues in the proceeding, I am prepared to relax the restriction upon documents recording new product development plans for Bega branded products, such that these documents would be included in Category C, rather than Category A. I see no reason to exclude these documents, as well as documents regarding marketing and promotional campaigns going forward, from the confidentiality regime altogether. The Bega executives and Mr Ferguson will be able to review these documents, and, if there are Bega personnel with relevant expertise who can provide useful instructions upon these documents, it would be a relatively straightforward exercise to have these personnel to execute a confidentiality undertaking.
Application for further affidavit of documents
80 Bega seeks an order that Fonterra file and serve an affidavit which:
(a) explains the instructions given to Fonterra’s former lawyers to search for the TMLA negotiation documents;
(b) explains the instructions given to Fonterra to search its own records in respect of the TMLA negotiation documents;
(c) states whether Fonterra’s search of its own records produced any discoverable documents;
(d) states whether Fonterra is aware of any other potential repositories of relevant documents;
(e) explains Fonterra’s document retention policies and whether those policies could have resulted in the detection of any potentially relevant documents; and
(f) confirms that Fonterra has discovered all TLMA negotiation documents.
81 While the applications in (c), (d), and (e) above are expressed in broad terms, I assume that the application in (d) above refers to other potential repositories of TMLA negotiation documents. However, I note that in its summons filed 8 November 2018, Bega sought orders that Fonterra make an affidavit with respect to its document retention policy and the searches undertaken for the purpose of making discovery generally. This application was overcome to some extent by the agreement between the parties that Fonterra conduct a range of targeted searches for specific categories of documents, the precise terms of which were governed by my orders of 20 December 2018.
82 In its application, Bega relied upon s 55B of the Civil Procedure Act 2010 (Vic) (‘CPA’), which provides as follows:
Affidavit of document management
(1) For the purpose of assisting a court to make any appropriate orders or directions in relation to discovery, the court may order or direct that a party provide to the court an affidavit of document management.
(2) An affidavit of document management may include the following –
(a) the volume, manner of arrangement or storage, type or location of discoverable documents;
(b) the party’s processes of document management.
(3) An affidavit of document management is in addition to any affidavit of documents which may be required in any proceeding.
83 Bega relies upon the relative paucity of TMLA negotiation documents discovered by Fonterra (approximately twenty relevant documents), compared with 151 documents discovered by Bega, in support of its application. In her affidavit sworn on 5 March 2019, Ms Whiting deposed that:
No explanation was provided as to why [Fonterra] would not have documents considering the benefit to [Fonterra] of the proposed transaction. Absent such explanation I believe that such documents are highly likely to exist or have existed, in light of the significance of the transaction to Fonterra.
84 Bega says that s 55B of the CPA empowers the Court to order that a party depose as to the efforts it has made to search for discoverable documents. I disagree. The only authority I have been able to locate regarding the purpose and construction of s 55B is the decision of Mukhtar AsJ in Austructures Pty Ltd and Anor v Makin and Anor, where his Honour referred to the explanation of this provision given by the Attorney‑General in the Second Reading Speech introducing this provision, and stated:
… to my mind ‘document management’ naturally connotes a construction that the section was intended for use in complex cases where a variety of document management systems or complex information technology systems are used, which call for an explanation.
85 I agree with the above statement. However, in any event, I consider that the Court would have power to make the orders sought by Bega, given the extremely broad terms of s 55(1) of the CPA, which provides that:
A court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.
86 The question is then, whether it is necessary or appropriate to make the orders sought by Bega, which would be a substantial imposition upon the resources of Fonterra, and where the making of such an order would carry with it the implication that Fonterra has been lax or otherwise deficient in carrying out its discovery obligations (noting that this has been a consistent theme of Bega’s submissions in the course of the series of applications before me to date).
87 There is no dispute that the TMLA negotiation documents are relevant to the issues in dispute in the proceeding. It is indeed a little surprising that Fonterra has in its possession so few documents in this category.
88 However, based upon the history of the process of discovery of the TMLA negotiation documents, I cannot form the view that Fonterra’s discovery in relation to this category of documents is deficient. Rather, the history shows that Fonterra originally pressed Bega to discover the TMLA negotiation documents, having had limited success in locating such documents through its own efforts.
89 On 24 September 2018, Fonterra issued a summons seeking, among other things:
[TMLA negotiation documents] which have not already been discovered by [Fonterra] in this proceeding, including:
(a) the letter dated 15 December 2000 from Ms Karen Wood to [Bega’s] solicitor, Mr David Ferguson; and
(b) drafts of the agreements and communications between the parties regarding drafts of those agreements.
90 Senior counsel for Fonterra drew my attention to four affidavits where Fonterra has expressly or impliedly given evidence concerning the discovery of the TMLA documents. First, the affidavit of documents itself, sworn on 22 May 2018. Secondly, in his affidavit of 11 September 2018, sworn in support of the application above, Mr Lees deposed that ABL had contacted Ashurst (then Blake Dawson Waldron) and K + L Gates (then Middleton Moore + Bevins), who acted for Fonterra related entities in this transaction. Thirdly, in his affidavit of 12 October 2018, Mr Lees deposed to the steps undertaken by Fonterra and ABL with respect to discovery, and provided an overview of the documents discovered by Fonterra to that date. Finally, in his affidavit sworn on 8 March 2019 in relation to the current application, Mr Lees deposed as follows:
When the parties gave general discovery in May 2018, the Plaintiffs discovered documents relating to the negotiation of, and factual background to, the Trade Mark Licence Agreements in 2001 and prior. Those documents included correspondence between the Plaintiffs’ lawyers and the Defendant’s lawyers in the negotiations, related agreements, drafts of the Trade Mark Licence Agreements and related agreements, internal marketing/strategy presentations, market share data, media reports and documents that explained the broader transaction of which the Trade Mark Licence Agreements related (an alliance between New Zealand Dairy Board and Bonlac, which both ultimately became part of the Fonterra Group). The documents included discussion of the benefits to the Plaintiffs of the Trade Mark Licence Agreements.
In preparing that discovery, searches were made of the records of the Plaintiffs in Australia and in New Zealand, as well as of the records of the lawyers who acted for the Plaintiffs in relation to the Trade Mark Licence Agreements: Ashurst (previously known as Blake Dawdon Waldron) and K&L Gates (previously known as Middletons Moore & Bevins).
Despite the searches that were undertaken, the Plaintiffs were unable to locate all of the relevant correspondence between the parties in engotiating the Trade Mark Licence Agreements, which is why the Plaintiffs sought orders to compel the Defendant, which had not discovered such documents, to discover such documents.
91 Mr Lees also objected to disclosure of communications between ABL and Ashurst and K + L Gates, on the basis that these communications are subject to legal professional privilege, and on the basis that there would be practical difficulties in collating the relevant communications.
92 In my view, the evidence does not justify making an order in the rather draconian terms sought by Bega. What the evidence does show is that it was Fonterra which was keen to obtain as many TMLA documents as it could, presumably not only to comply with its discovery obligations, but also because it considered that such documents would assist in establishing its case that the restraint imposed upon Bega by the TMLA was, in all of the circumstances, reasonable. To that end, once Fonterra had exhausted its own avenues of inquiry, it pressed Bega, which at this time had not discovered any TMLA negotiation documents, to make discovery. This was resisted by Bega, and Fonterra made an application to compel Beta to discover these documents on 24 September 2018. The application was resisted by Bega on the grounds of relevance. I rejected Bega’s submissions in that regard, and, as it turns out, consequent upon the orders I made on 25 October 2018, Bega did make discovery of a substantial number of TMLA negotiation documents. That this discovery exercise proved to be more fruitful than the searches undertaken by Fonterra does not, of itself, suggest that Fonterra’s discovery is deficient.
93 Accordingly, I decline to make the orders sought in paragraph 6 of Bega’s summons of 5 March 2019.
Financial Template
94 Bega’s complaints concerning the draft financial template are twofold: first, that information derived from the IRI database (‘IRI data’) is presented on a calendar year basis, while information derived from Fonterra’s own financial records is presented on a financial year basis, making the two data sets difficult to compare. Secondly, while the draft financial template includes some information about promotional expenditure on specific campaigns, Bega says this information is incomplete.
95 Fonterra says that the IRI database cannot be manipulated to present the IRI data on a calendar year basis. Further, it contends that in order to meet Bega’s demand that it populate the financial template with data regarding all promotional campaigns undertaken by Fonterra during the relevant period, Fonterra would need to carry out a lot of work that it is not required to do.
96 In relation to the first matter, it seems to me that the manner of presentation of the financial data is a matter which, like other queries raised by Bega, could and should be dealt with between the solicitors for the parties. To the extent that any guidance is required, it is clearly desirable that the data be temporally consistent. If that necessitates splitting the IRI data to provide for an approximation on a financial year basis, then that should be done.
97 In relation to the second matter, Fonterra’s submissions to the effect that populating the financial template with data regarding expenditure upon promotional campaigns will require a lot of work that Fonterra otherwise would not have to do overlooks the context in which the order for the provision of the draft financial template was made, and the purpose for which it was made.
98 On 30 November 2018 I made, among other things, the following orders:
By 30 November 2018 [Fonterra] serve upon [Bega] a proposed financial template in relation to Categories B and Ii, as referred to in the affidavit of Mr Lees sworn on 9 November 2018 and the letter from ABL to Gilbert + Tobin dated 23 November 2018.
99 This order followed discussions between the parties consequent upon a ruling I made on 30 October 2018 in relation to an application made by Bega seeking discovery by Fonterra of a large number of categories of documents. Categories B and Ii concerned Fonterra’s internal financial records. While Fonterra had discovered the IRI data for its products, and some high level internal financial data, Bega sought that Fonterra provide extensive discovery of its own financial records regarding sales of particular products and expenditure on the marketing and promotion of those products, in part because G + T found the IRI data unwieldy to work with. Further, Ms Whiting of G + T deposed that she wanted this further discovery with a view to the parties putting an agreed position before the Court regarding these matters.
100 Fonterra objected to giving discovery regarding its internal financial records on the grounds that the request was oppressive, and would place an onerous burden upon Fonterra to generate documents from its records in a form in which they otherwise didn’t exist.
101 In my ruling of 30 October 2018, I stated as follows:
As noted above, I agree that documents evidencing comparisons of actual outcomes with budgets and projections are not relevant, as I cannot see how documents recording how Fonterra performed against its internal sales targets are relevant to the issues raised in the pleadings. As noted by counsel for Fonterra in his submissions, what is important is what Fonterra actually did and achieved, not what it planned to do.
I also understand how Bega would find the IRR data unwieldly to use, and agree with Bega’s objective that there be an agreed position at trial with respect to the key financial data, being sales of the branded products, the market share of the branded products, and Fonterra’s expenditure upon promoting the branded products. However, I also accept that Fonterra has already discovered a significant number of documents which fall within this category. Further, while I accept that Fonterra is not obliged to create documents in order to comply with its discovery obligations, the question of what sales were made, and what Fonterra spent on advertising and promoting the branded products is a central issue in the proceeding.
A possible means of resolving the impasse between the parties concerning this issue is for the parties to agree on a template for an agreed summary of Fonterra’s financial records which will be of assistance to the trial judge. The agreed template could be populated by Fonterra based upon its own financial records. There has probably been sufficient discovery of financial information to date to enable Bega to cross‑check the data to have some comfort with the accuracy of the contents of the summary, with the IRR data available as a fall back if need be. There may well be some ‘fields’ which, based upon Mr Lee’s evidence, Fonterra cannot populate without substantial additional work (such as expenditure upon individual promotional campaigns). In such cases, there may be suitable proxy data which could be used instead, such as budgeted expenditure for specific promotional campaigns.
While I am content for the parties to seek instructions and make further submissions on this proposal, it seems to me that, particularly given the looming trial date, there may well be some practical advantages to this approach, by circumventing to some extent the discovery process and instead focussing upon how this material will be presented at trial. After all, I doubt that the question of the quantum of the sales Fonterra made and what Fonterra spent on advertising and promotion will be the central controversy at trial: rather, the dispute will largely concern whether Fonterra has done enough to promote the sales of Bega products. I agree that it is undesirable for the parties to become bogged down in what was actually earned and spent, and I expect that there would be little reason to doubt the veracity of the figures provided by Fonterra.
…
I shall give the parties the opportunity to review these reasons and the attached schedule, and consider and take instructions upon the following matters:
(a) whether it is feasible to adopt my proposed approach with respect to the development of an agreed summary of Fonterra’s sales data and expenditure upon advertising and promotion as an alternative to further discovery; …
102 Accordingly, while it was not necessary for me to finally determine the matter, one of the purposes of making the order for the draft financial template was to relieve, at least to some extent, the burden upon both parties from any order requiring Fonterra to give discovery of extensive internal financial records. First, while these documents were prima facie relevant, I formed the view that the issue of what amounts Fonterra spent on marketing and promotional activities was ultimately unlikely to be controversial (as opposed to the question of whether how much was spent was adequate and/or appropriate). In those circumstances, it seemed to me to be unproductive to require Fonterra to discover vast reams of financial data (and for Bega to spend a great deal of time reviewing this data) so as to enable each party to present their own understanding of what was earned and spent by Fonterra. Further, I was also conscious that it would be helpful for the trial judge to have a convenient summary of this data, particularly if, as I expect, there is no real dispute between the parties as to the amounts earned by Fonterra from the sale of its products and the amounts spent by Fonterra to market and promote these products.
103 Accordingly, to say that an order requiring Fonterra to make changes and additions to the financial template is requiring it to do work it otherwise would not have to do is somewhat beside the point. The effect of requiring the preparation of the financial template is to relieve Fonterra of work that, subject to arguments about proportionality, it would otherwise have had to do by way of discovery. Further, it is desirable that the financial template be as fulsome as possible in order to be of assistance to the parties, the experts, and the Court.
104 It is, however, reasonable to set some boundaries around the task imposed upon Fonterra with respect to providing information about expenditure (either actual or budgeted) on specific promotional campaigns. As indicated during the course of the hearing on 12 March 2019, a useful reference point might be the particulars provided by Fonterra under paragraph 63(c) of its Reply and Defence to Counterclaim, which enumerated a member of marketing and promotional campaigns Fonterra relied upon in response to Bega’s allegation that Fonterra’s efforts to promote Bega branded products were inadequate. Alternatively, the promotional activities referred to in Bega’s summons filed 3 October 2018 provide a useful guide. I would also be open to submissions that there ought be some limitation on the time period over which Fonterra ought to be required to provide this information, perhaps consistent with the temporal limitation which has been imposed or agreed with respect to other discovery categories.
Summary and Conclusion
105 Accordingly, I make orders to the following effect:
(a) in relation to the confidentiality regime, I will order that Mr Ferguson, subject to the provision of a confidentiality undertaking in the usual form, and subject to there being liberty to apply, be entitled to inspect Category B documents;
(b) further in relation to the confidentiality regime, that Category A be amended to omit any reference to new product development plans for Bega branded products, Category C be amended to include new product development plans for Bega branded products, and the solicitors for Fonterra review the Category C documents in order to confirm that the information in them concerning marketing and promotional strategies and activities remains operative going forward as at the date of this ruling;
(c) I will set a date by which Fonterra must produce to Bega all confidential documents; and a date by which Bega must formally notify Fonterra of any confidential documents in which the categorisation of confidential information is disputed;
(d) Bega’s application that Fonterra file and serve an affidavit with respect to its searches for the TMLA negotiation documents, and other ancillary orders, be dismissed;
(e) in relation to the proposed financial template, and subject to there being liberty to apply, Fonterra provide further financial information regarding the promotional activities referred to in the particulars to paragraph 63(c) of the Reply and Defence to Counterclaim dated 4 February 2019, and/or sub‑paragraphs (1)(n), (o), (p), (q), (r), (u), (v), (w) and (z) in Bega’s summons filed 3 October 2018; and
(f) otherwise, the orders governing the confidentiality regime will remain in place until further order.
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