Fonterra Brands Australia Pty Ltd v Bega Cheese Ltd (No 4)
[2020] VSC 16
•6 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
INTELLECTUAL PROPERTY LIST
S ECI 2017 00283
| FONTERRA BRANDS AUSTRALIA PTY LTD (ACN 095 181 669) AND ANOTHER (according to the attached schedule) | Plaintiffs/ Defendants by Counterclaim |
| v | |
| BEGA CHEESE LIMITED (ACN 008 358 503) | Defendant/ Plaintiff by Counterclaim |
---
JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29, 30, 31 January 2020 |
DATE OF JUDGMENT: | 6 February 2020 |
CASE MAY BE CITED AS: | Fonterra Brands Australia Pty Ltd and anor v Bega Cheese Ltd (No 4) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 16 (Revised 4 May 2020) |
---
PRACTICE AND PROCEDURE – Legal professional privilege – Application for the production of documents by the plaintiffs – Principles for claiming privilege under s 118 of the Evidence Act 2008 (‘Act’) – Dominant purpose of obtaining legal advice – IOOF Holdings v Maurice Blackburn [2016] VSC 311, considered and applied – Whether party waived any legal professional privilege it holds – No waiver of privilege until an affidavit is read in open court or a party gives evidence on oath at trial – Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283, referred to – Low threshold of the statutory test set out in s 125 of the Act – Cargill Australia Ltd v Viterra Malt Pty Ltd & Ors [2017] VSC 126, referred to – Finding that there were reasonable grounds that the defendant had engaged in unconscionable conduct – no document in furtherance of any fraud.
PRACTICE AND PROCEDURE – Legal professional privilege – Application for the production of documents by the defendant on the basis that the substance of the legal advice has been disclosed – Alleged disclosure of legal advice must be clear and unequivocal – Mullett v Nixon [2016] VSC 129 and Banksia Securities Limited v The Trust Company [2017] VSC 583, referred to – Where statement in the confidential discussion paper merely exposes the ultimate conclusion of the advice in highly generalised terms, not the substantive reasoning behind the ultimate conclusion – Privilege not waived.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G Dalton QC with Mr P Creighton‑Selvay on 29 and 30 February 2020, and Mr P Creighton-Selvay on 31 January 2020 | Arnold Bloch Liebler |
| For the Defendant | Mr J Davis QC with Ms X Teo on 29 and 30 January 2020, and Dr C Button QC with Ms X Teo on 31 January 2020 | Gilbert + Tobin |
HER HONOUR:
In November 2019, a trial between the parties commenced before McDonald J. The plaintiffs (‘Fonterra’) and the defendant (‘Bega’) are parties to, among other things, a trademark licensing agreement (‘TMLA’), which was executed on 8 May 2001. The TMLA facilitated a significant commercial arrangement between the parties, whereby Fonterra would purchase and market natural cheese produced by Bega under the ‘Bega’ brand. The TMLA conferred upon Fonterra a license to use the Bega trademark. A central issue in the current proceeding is whether the licence is exclusive, thus depriving Bega of the right to use the ‘Bega’ trademark on non-cheese products.
The dispute which gave rise to the current proceeding commenced in 2017, when Bega, without the consent, and, indeed, in the face of active opposition from Fonterra, commenced using the Bega brand name on a range of food products, such as peanut butter and macaroni and cheese, some of which became part of the Bega stable when Bega purchased the Australian business of Mondelez Inc, a multinational food company which owned, among other things, Kraft branded peanut butter. Accordingly, the commercial interests of both parties are significant: both Fonterra and Bega generate significant revenue from the sale of Bega branded cheese, and Bega is keen to build and promote the products it acquired from Mondelez.
The relevant clauses in the TMLA which are central to the issues in this proceeding (‘disputed clauses’) are set out below.
Clause 3.1 provides as follows:
Subject to clauses 3.5, 3.6, 3.7 and 3.8, Bega hereby grants to the Licensee, during the Term, the sole and exclusive:
(a) licence of the Trade Marks; and
(b)licence of any copyright owned by Bega or a Related Body Corporate of Bega in any display material,
in the Territory on or in relation to Products for sale in the Territory.
Clause 3.2 provides as follows:
For the purposes of clause 3.1, ‘sole and exclusive license’ means that during the Term Bega agrees, subject to clauses 3.5, 3.6, 3.7 and 3.8:
(a)not to grant any other person (including any Related Body Corporate of Bega) the right to use the Trade Marks (or any trade mark which is similar to any Trade Mark) in the territory; and
(b)not to use, or permit the use by any other person (including any Related Body Corporate of Bega) of, the Trade Marks (or any trade mark which is similar to any Trade Mark) in the Territory,
without the consent of the Licensee. The Licensee consents to Bega using the Trade Marks specified in Schedule 5 for the purposes set out in the Schedule.
Fonterra contends that, on the proper construction of the disputed clauses, it has a sole and exclusive right to use the Bega brand in Australia, save for a few limited (and commercially peripheral) exceptions specified in schedule 5 of the TMLA. Bega contends that the proper construction of the disputed clauses is that Fonterra’s license is limited to natural cheese products, leaving it free to use the Bega brand on non-cheese food products.
Fonterra issued this proceeding on 11 December 2017, seeking to restrain Bega from using the trademarks, based upon its preferred construction of the disputed clauses. Alternatively, in the event that the Court does not accept its construction of the disputed clauses, Fonterra seeks rectification of the disputed clauses to give effect to what it says was the common intention of the parties. Further, and again in the alternative, Fonterra says that it is entitled to rectification of the disputed clauses for its unilateral mistake concerning the effect of the disputed clauses, by reason of Bega’s unconscionable conduct in not drawing Fonterra’s attention to the fact that the disputed clauses were not effective to confer the exclusive license that Fonterra believed it had, in circumstances where Bega knew that the exclusivity of the disputed clauses was a ‘deal breaker’ for Fonterra.
On 23 March 2018, Bega filed and served a counterclaim, referring to other express terms of the TMLA, which require Fonterra to promote the sales of Bega branded products, to maintain the good name and image of the Bega trademark, and to promote Bega branded cheese in accordance with agreed marketing principles. Bega further relied upon what it said was an implied term of the TMLA not to give undue preference to Fonterra owned branded products such as Mainland cheese and Perfect Italiano cheese. Later, Bega expanded the scope of its counterclaim to allege that Fonterra breached the TMLA by making misrepresentations concerning the provenance of Bega branded cheese in contravention of the Australian Consumer Law, and breached the TMLA (and an associated Product Supply Agreement) by providing to Bega cheese for cutting and wrapping which did not meet the quality standards specified in those agreements. Bega says, by reason of Fonterra’s breaches, it is entitled to terminate the TMLA and the related agreements.
There are, in effect, four applications before me, issued after the commencement of the trial, as follows:
(a) an application by Fonterra to inspect documents over which Bega has claimed legal professional privilege, largely, but not exclusively, concerning the negotiation of the TMLA (‘TMLA negotiation documents’);
(b) an application by Fonterra for further discovery by Bega;
(c) an application by Bega for further discovery from Fonterra; and
(d) an application by Bega that Fonterra produce three documents over which Fonterra claims legal professional privilege.
The discovery applications in (b) and (c) above were dealt with by a ruling I delivered on 3 February 2020, and consequential orders made on 5 February 2020. These reasons concern the parties’ applications for the production of documents over which the parties claim legal professional privilege.
Fonterra’s application
Fonterra has challenged Bega’s claim to privilege over 25[1] documents which largely, but not entirely, pre-date the making of the agreement which led to the parties’ entry into the TMLA in May 2001. Bega’s claims are challenged on four bases:
[1]Document 5A in the schedule prepared by Fonterra’s solicitors appears to be the same as part of document 6.
(a) first (in some cases), that Bega has not adduced sufficient or satisfactory evidence to establish that the documents were immune from disclosure by reason of s 118 of the Evidence Act 2008 (Vic) (‘Act’);
(b) secondly, that the privilege in the TMLA negotiation documents has been waived by Bega within the meaning of s 122(2) of the Act;
(c) thirdly, the TMLA negotiation documents have lost their privileged status by reason of s 125 of the Act; and
(d) fourthly, in respect of one document, Fonterra claims the right to inspect the document pursuant to s 126 of the Act.
There are thirteen documents over which Fonterra challenges Bega’s privilege claims on the basis that they do not fall within the terms of s 118 of the Act, as follows:
No.
Doc ID
Description
1 BEG.008.001.0013 Handwritten note prepared during meeting between Bega and Bonlac with legal representatives present. 2 BEG.008.001.0014 Handwritten note prepared during meeting between Bega and Bonlac with legal representatives present. 3 BEG.008001.0035 Handwritten note prepared during meeting between Bega and Bonlac with legal representatives present. 4 BEG.008.001.0037 Handwritten note prepared during meeting between Bega and Bonlac with legal representatives present. 6 BEG.008.001.0002 Secretarial matters for Director’s meeting 20 December 2000 (Appendix 1). 8 BEG.008.001.0032 Annotated letter from Alex Sloan to Maurice Van Ryn dated 21 December 2000. 13 BEG.008.001.0011 Handwritten note of meeting between David Williams, David Ferguson, Barry Irwin, Maurice Van Ryn, Colin Griffin and Mick Byrnes dated 11 January 2001. 14 BEG.008.001.0074 Email from David Ferguson to Barry Irwin, Colin Griffin and David Williams “KEY OUTSTANDING ISSUES” dated 18/1/01. 16 BEG.007.006.0063 Discussion paper of the board meeting to be held on 24 January 2001. 17 BEG.007.004.0421 Handwritten notes of a meeting by Colin Griffin. 18 BEG.001.001.3988 Minutes of the meeting of the Board of Bega held on 9 February 2001. 19 BEG.008.001.0015 Handwritten note of Bega Board meeting attended by Mr Ferguson dated 9 February 2001. 22 BEG.012.005.0370 Bega Brand Strength presentation dated 6 February 2018. NOTE: To better assist in the understanding of the above schedule and the other schedule and chronology provided later in these reasons, the following should be noted:
(a)the chairman of Bega was Mr Barry Irwin, and the Group General Manager was Mr Maurice Van Ryn. Mr Colin Griffin, the author of the handwritten notes referred to in the above schedule, was the company secretary of Bega, and had primary carriage of the negotiations of the TMLA and related agreements on behalf of Bega. Mr David Ferguson, then of Abbot Tout, was Bega’s solicitor, and Mr David Williams of Hambros was a commercial advisor retained by Bega; and
(b)the predecessor to Fonterra, often referred to in the negotiations as ‘Consumer Co’ was a joint venture between Bonlac Foods Ltd (‘Bonlac’) and the New Zealand Dairy Board (‘NZDB’) (together ‘Bonlac/NZDB’). During the course of the negotiations with Bega, the NZDB was represented by Blake Dawson Waldron (‘BDW’), and Ms Karen Wood, Bonlac’s general counsel, was also involved in the negotiations.
Of course, if Bega is unable to discharge the burden of showing the above documents, or any of them, were brought into evidence for the dominant purpose of Bega obtaining legal advice, question of waiver or fraud do not arise.
Section 118 of the Act provides that:
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of –
(a) a confidential communication made between the client and a lawyer; or
(b)a confidential communication made between 2 or more lawyers acting for the client; or
(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person –
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
The relevant principles are well settled, and are set out in Fonterra’s outline of submissions, as follows:
(a)First, the party claiming the privilege bears the onus. That onus ‘will only be discharged if the party establishes facts from which the court may determine that the privilege is being properly claimed’. In this respect, the evidence ‘must be focused and specific’, and formulaic or bare assertions are not sufficient.
(b)Second, ‘it is not possible to “disclose” to a particular person something already known to or possessed by that person’. It follows that, if a communication has already been disclosed to the Plaintiffs, then s 118 cannot be relied upon, by the Defendant, to prevent the ‘disclosure’ of that communication to the Plaintiffs.
(c)Third, the ‘dominant purpose’ required by s 118 must be ‘the purpose which led to the creation of the document or the making of the communication’. The ‘dominant purpose’ must be ‘the ruling, prevailing or most influential purpose’ at the time the document was brought into existence. In this respect, there can be only one dominant purpose – if there are multiple purposes of equal weight, they will not satisfy the description of a ‘dominant purpose’.
The above principles were derived in part from the summary of relevant principles set out by Elliott J in IOOF Holdings Ltd v Maurice Blackburn Pty Ltd.[2] In addition to those set out above, other relevant principles include the following:
[2][2016] VSC 311 [47].
(a) the dominant purpose must be determined objectively having regard to the evidence, the nature of the document and the parties’ submissions;[3]
(b) the relevant purpose is ordinarily the purpose of the person who brings into existence the document containing the privileged communication, whose subjective intention is relevant;[4] and
(c) legal advice may include any advice as to what prudently and sensibly be done in the particular circumstances.[5]
[3]Ibid.
[4]Ibid.
[5]Ibid.
Bega’s privilege claims are supported by an affidavit sworn by its solicitor, Ms Janet Whiting. Most of what Ms Whiting deposes to is on information and belief, with her instructions largely coming from Mr Griffin.
Fonterra criticised this evidence as being vague and unfocussed. While it accepted that hearsay evidence of this kind is admissible on the current application, such evidence should be given less weight than direct, first-hand evidence. Bega submitted that the evidence was as focussed as it could be given the constraints on a party adducing evidence to support claims for legal professional privilege: evidence which is too focussed and specific runs the risk of disclosing the privileged communications.
I accept that the evidence of Ms Whiting was sufficient to establish a prima facie case regarding the purpose for which the documents were brought into existence was a purpose protected by s 118 of the Act. However, given the nature of the transaction, the open nature of much of the communication between the parties, and the different roles of the participants in the negotiations, I accept that there is a possibility that there would be multiple purposes for bringing documents into existence, especially where these documents are records of meetings. My findings in relation to each specific document follow.
Documents 1 to 4 are described as handwritten notes of meetings made by Mr Griffin, where the legal representatives of Bega and Bonlac/NZDB were present. Ms Whiting deposed that Mr Griffin instructed her that his practice was to keep notes of the discussions for the purposes of discussing the legal and commercial issues arising in those meetings with Mr Ferguson, and for the dominant purpose of seeking legal advice from Mr Ferguson.
Fonterra submitted that it was inherently unlikely that the ‘ruling, prevailing or most influential purpose’ of Mr Griffin was to obtain legal advice, particularly when it was apparent from the notes that Bega’s lawyers were present during the relevant meetings. Rather, Fonterra submitted that the author of the notes had another, non‑privileged purpose, that is, to retain a record of what transpired at the meetings.
I accept Fonterra’s submissions that it is quite likely that Mr Griffin would have multiple purposes in taking notes of meetings of the nature identified in the evidence. Having inspected the documents, I do not consider that the contents of the handwritten notes contained in documents 1 to 4 bolster Bega’s claim for privilege: rather, the handwritten notes merely record the discussions between the parties.
Documents 13 and 17 are handwritten notes of meetings between Bega executives, Mr Ferguson, and Mr David Williams of Hambros. Ms Whiting deposed that ‘the dominant purpose of the meeting was for Mr Ferguson to provide legal advice to Bega’.
Upon inspection of these documents, the discussions recorded in these notes primarily concern commercial issues. I am not satisfied that the dominant purpose of the notes was for the purpose of Bega obtaining legal advice. However, documents 13 and 17 do contain some records of legal advice. These portions should be redacted in accordance with the orders made this day.
Document 6 includes a paper prepared by Mr Ferguson, which I accept was prepared for the dominant purpose of providing Bega legal advice regarding the terms of the TMLA.
Document 8 is a letter from Mr Alex Sloan of NZDB to Mr Van Ryn of Bega dated 21 December 2000. Ms Whiting deposed that she was instructed by Mr Griffin that he made the annotations ‘for the dominant purpose of discussing the letter with Mr Ferguson so that Mr Ferguson might consider the content of any response to be sent by or on behalf of Bega’. Having reviewed these notations, I accept Bega’s claim in that regard.
Document 14 is an email from Mr Ferguson dated 18 January 2001, headed ‘Key Outstanding Issues’ which attaches a draft letter from Mr Ferguson to Bonlac and NZDB regarding the transaction. The description of the document is sufficient to establish Bega’s claim for privilege.
Document 16 is a discussion paper for review by the Bega board, and includes a redaction on the first page under the heading ‘Draft advice from David Williams-Hambros’, which was challenged by Fonterra on the basis that Mr Williams was a commercial advisor, not a legal advisor. Ms Whiting deposed that the ‘discussions’ referred to in the unredacted part of this section were for the dominant purpose of Bega obtaining legal advice in relation to Mr Williams’ advice. This evidence was confirmed by my inspection of the relevant section.
Document 18 is a copy of the minutes of a board meeting of Bega held on 9 February 2001, which contains a redaction said to record a presentation made by Mr Ferguson to the Bega board. My inspection of the document confirms this evidence. Document 19 is a handwritten record of the same meeting. The redacted section of this document also refers to legal advice provided by Mr Ferguson.
Document 22 is an Interbrand report dated 6 February 2018. Ms Whiting deposed that a part of the document which has been redacted reveals the content of confidential legal advice provided to Bega. This evidence is confirmed by my inspection of the relevant section of the document.
Accordingly, in summary, my conclusions with respect to the documents where Fonterra has challenged Bega’s claims for legal professional privilege on the basis that they do not satisfy the test in s 118 of the Act are as follows:
(a) I am not satisfied that documents 1, 2, 3, 4, 13 and 17 were prepared for the dominant purpose of Bega obtaining or receiving legal advice, and largely do not record legal advice, and should be produced (subject to appropriate redactions in the case of documents 13 and 17); and
(b) Bega has established its claims for legal professional privilege with respect to documents 6, 8, 14, 16, 18, 19 and 22.
However, Fonterra also challenges Bega’s claims for legal professional privilege under ss 122(2), 125 and, in one case, s 126 of the Act in relation to the TMLA negotiation documents. The TMLA negotiation documents are listed in the schedule below.
No.
Doc ID
Description
5 BEG.008.001.0052 Note on outstanding issues regarding the Trade Mark Licence Agreement prepared by David Ferguson dated 14 December 2000. 6. BEG.008.001.0002 Secretarial matters (to the Board of Directors Meeting of 20 December 2000) (NB: also includes document 5A). 7. BEG.008.001.0031 Letter from David Ferguson titled ‘Outstanding Issues’ dated 19 December 2000. 8. BEG.008.001.0032 Annotated letter from Alex Sloan to Maurice Van Ryn dated 21 December 2000. 9. BEG.008.001.0039 Handwritten note of call with David Ferguson dated 21 December 2000. 10. BEG.008.001.0010 Handwritten note of a conference call between D Ferguson, B Irwin, R Parbery, M V Ryn, and C Griffin dated 21 December 2000. 11. BEG.008.001.0050 Notes for conference call between David Williams, Hambros, Barry Irwin, Richard Parbery, Maurice Van Ryn, Collin Griffin and David Ferguson dated 21 December 2000. 11A. BEG.001.002.1903 Email from David Ferguson to Colin Griffin titled ‘Fw: Agreements’ dated 2 January 2001. 12. BEG.008.001.0065 Handwritten note of conversation with David Ferguson dated 9 January 2001. 13.* BEG.008.001.0011 Handwritten note of meeting between David Williams, David Ferguson, Barry Irwin, Maurice Van Ryn, Colin Griffin and Mick Byrnes dated 11 January 2001. 14. BEG.008.001.0074 Email from David Ferguson to Barry Irwin, Colin Griffin and David Williams subject: “KEY OUTSTANDING Issues” dated 18 January 2001. 14A. BEG.001.002.4790 Draft letter from David Ferguson to Karen Wood and Murray Dickson dated 18 January 2001. 15. BEG.008.001.0075 Draft letter from David Ferguson to Karen Wood attached to email at BEG.008.001.0074 dated 22 January 2001. 16. BEG.007.006.0063 Discussion paper for Board meeting held 24 January 2001. 17.* BEG.007.004.0421 Handwritten notes of meeting by Colin Griffin dated 2 February 2001. 18. BEG.001.001.3988 Minutes of meeting of the Board of Directors held on 9 February 2001. 19. BEG.008.001.0015 Handwritten note of Board meeting dated 9 February 2001. 19A. BEG.008.001.0017 Email from David Ferguson to Adrian Battitesta, Colin Griffin and Maurice Van Ryn dated 19 February 2001. 20. BEG.008.001.0064 Handwritten note of conversation with David Ferguson dated March 2001. 20A. BEG.008.001.0001 Email from David Ferguson to Colin Griffin ‘Disclosure Statement’ dated 19 March 2001. *Ordered to be redacted in part.
All of the documents in the above schedule were brought into existence during the period in which Bega was negotiating the terms of a number of agreements to give effect to the overarching transaction between Bega and Bonlac/NZDB, whereby Fonterra assumed control of marketing natural cheese products under the Bega brand. The Master Agreement, which, among other things, required the parties’ entry into the TMLA, was executed on 6 March 2001. During the course of the negotiations, where each party was represented by lawyers as well as key management personnel, the wording and intent of the disputed clauses was the subject of some attention.
Key events in the chronology of events include the following:
Date Event 29 November 2000 Letter from BDW to Mr Ferguson with draft TMLA. 1 December 2000 Board meeting of Bega where a discussion paper regarding the costs and benefits of the proposed transaction were discussed. Referred to the brand exclusivity issue being a ‘deal breaker’ for Bonlac/NZDB. 1 December 2000 Mr Ferguson writes to BDW proposing an amendment to the disputed clauses regarding the circumstances in which consent for Bega to use the Bega products would be withheld or granted. 4 December 2000 Mr Irwin writes to the Board of Bega as follows:
Gentlemen, make no mistake we are selling the domestic rights to the Bega brand in this deal, further, we are agreeing we will not participate in any form of domestic sales and marketing activity for the life of this agreement.
7 December 2000 BDW responds to 1 December 2000 letter, stating:
However, the issue of consent to use the Bega brand is considered fundamental and Consumer Co should be free to give or withhold consent as and when it pleases. I am instructed Bega agreed to this proposal as part of the ‘trade‑off’ on pricing.
15 December 2000 Ms Wood of Bonlac writes to Mr Ferguson outlining the outstanding issues to be resolved at a forthcoming meeting (18 December 2000) including the scope of the disputed clauses. 18 December 2000 Memo from Mr Griffin to Bega Board re outstanding issues for discussion at Bega board meeting on 20 December 2000. 19 December 2000 Mr Ferguson writes to Bonlac/NZDB referring to exclusivity clauses as being a ‘deal breaker’. 21 December 2000 Ms Wood of Bonlac writes to Bega referring to Mr Ferguson’s reference to the right to use the Bega brand as a ‘deal breaker’ as being correct. 3 January 2001 Ms Wood of Bonlac writes to Mr Ferguson re right to use Bega brand ‘we are unable to move from the position we have previously put on this issue’. 8 January 2001 Further draft of TMLA sent to Bega. 9 January 2001 Date of printout of draft TMLA with handwritten notation by Mr Griffin
‘Therefore exclusivity limited to ‘Products’ but this is not what they mean.’
11 January 2001 File note by Mr Griffin headed ‘Issues for discussion’ states under the heading ‘use of brand’
· current wording actually works for Bega but it is not what Consumer Co intends and we need to go back to Consumer Co
· clause 3.2 is intended to be an absolute prohibition but it is not yet worded like that
20 January 2001 Meeting of Bega Board 23 January 2001 Mr Ferguson writes to Bonlac regarding the TMLA regarding a number of issues raised by Hanbros, stating:
As a preliminary point, while Bega Co-op remains concerned with clause 3.2 of the Trade Mark Licence it notes the importance of this provision to Consumer Co and, provided that the other issues in this letter can be adequately dealt with, Bega Co‑op is prepared to accept the current wording of clause 3.2.
24 January 2001 Meeting of Bega Board. 26 January 2001 Ms Wood writes to Mr Ferguson:
As you correctly identify this remains an issue of critical importance to us. We understand that the Bega mark is currently used on some non‑cheese products manufactured by BCS and that BCS would like to continue to use the mark on these products. We would be happy to consider any list of products that falls into this category with a view to providing a blanket consent at the outset. In considering any request we will be motivated only by the desire to ensure that the stature of the Bega mark, rights to the use of which have been acquired at a considerable cost, will not be undermined.
2 February 2001 Recording of meeting between Bega executives, directors and advisors. File note records the following:
Cl 3.2 – use of Bega marks
Consumer Co believe this restricts our ability to use the Bega mark on any products
but words reflect that this is only a restriction for use on ‘PRODUCTS’ as defined, which works for BCS.
5 February 2001 New version of TMLA circulated. 14 February 2001 Board meeting of Bega appointed a committee to authorise execution of Master Agreement. 1 March 2001 Bega sends Bonlac’s lawyers a list of products to be included of schedule 5 of TMLA. 6 March 2001 Execution of Master Agreement. 2 April 2001 Bega executes disclosure statement to Members, stating, among other things
Bega Cheese will remain the owner of the Bega trademarks. Bega Cheese’s rights to use the Bega trademarks in Australia will be restricted by the exclusive licence rights to be granted to Consumer Co under the Trade Mark Licence Agreement. However, Bega Cheese will be free to use the Bega trademarks and to sell products under those trademarks outside of Australia, and certain other products within Australia as identified in the Trade Mark Licence Agreement.
8 May 2001 Execution of the TMLA.
I shall not traverse the evidence and submissions of the parties in any great detail. I do however note that Bega did not, understandably in the circumstances, adduce any evidence which sought to contradict Fonterra’s contention that Bega had acted unconscionably in the course of the TMLA negotiations. Fonterra contended that:
(a) the acquisition of a sole and exclusive licence to use the Bega brand in Australia was a critical issue for Bonlac/NZDB, indeed, it was a ‘deal-breaker’, and Bega was well aware of that;
(b) sometime during January 2001, Bega nevertheless formed the view that the disputed clauses limited the exclusive licence to natural cheese products, not all products;
(c) someone at Bega formed the view that Bega should alert Bonlac/NZDB to this issue;
(d) however, no such action was taken, and on 23 January 2001 Mr Ferguson wrote to BDW stating that Bega accepted the wording of the disputed clauses without making any reference to the meaning of those clauses;
(e) in its disclosure statement to Bega members in April 2001, Mr Irwin presented the disputed claims as providing for a sole and exclusive licence of the Bega trademark, in accordance with Fonterra’s position as to the construction of the disputed clauses;
(f) notwithstanding the above, Bega in its defence denies that the disputed clauses have the meaning contended for by Fonterra, and denies that it held any intention that the disputed clauses had the meaning contended for by Fonterra; and
(g) in its outline of evidence dated 13 September 2019, Bega stated that it expected Mr Irwin to give evidence that it was always his (and Bega’s) intention that Fonterra’s exclusive licence would be limited to natural cheese products.
The schedule in paragraph 32 of these reasons identifies a number of communications between Bega and Mr Ferguson in the period leading up to Mr Ferguson’s letter of 23 January 2001 (where Bega accepted Bonlac/NZDB’s proposed wording of the disputed clauses). The schedule also identifies communications between Mr Ferguson and Mr Griffin in March 2001 prior to the execution of the disclosure statement on 2 April 2001. Accordingly, Fonterra submitted that it is likely that these documents record legal advice relevant to the formation of Bega’s state of mind with respect to the proper construction of the disputed clauses (which Fonterra says Bega has put in issue in this proceeding), and may also have been brought into existence in furtherance of Bega’s deliberate scheme to mislead Fonterra into believing that the disputed clauses provided Fonterra with an exclusive licence with respect to the Bega brand with respect to all food products in Australia.
Waiver – section 122 of the Evidence Act
The question here is whether Bega has waived any legal professional privilege it holds in the TMLA negotiation documents by reason of s 122(2) of the Act.
Section 122(2) of the Act provides as follows:
... this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way inconsistent with the client or party objecting to the adducing of evidence because it would result in a disclosure of a kind referred to in Section 118, 119 or 120.
Loss of legal professional privilege in the circumstances outlined in s 122(2) is commonly said to occur as a result of the ‘implied waiver’ of the privilege holder. Once again, the applicable principles were conveniently set out in Fonterra’s submissions, and are not in dispute, as follows (citations omitted):
The Court of Appeal recently considered the principles relevant to issue waiver in Viterra Malt Pty Ltd & Ors v Cargill Australia Ltd & Anor (Viterra). After analysing the case law, the Court emphasised that the “preferable course is not to apply any alternative test but the language of the statute”, such that the critical question resolved, in that case, to whether the respondent had “acted in a way inconsistent with it objecting to producing privileged communications evidencing or recording its knowledge” of certain matters. Nevertheless, the Court recognised that assistance in “understanding and applying” the test prescribed by s 122(2) “may be derived from Mann v Carnell and other authorities”.
In that context, the following principles are of particular relevance to the resolution of the issues arising under s 122(2) in this proceeding.
First, what brings about any waiver “is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large”. Thus, considerations of fairness have a role to play, when analysing whether there is the necessary inconsistency to constitute a waiver.
Second, a relevant inconsistency (and unfairness) might arise if a party makes assertions about its state of mind in circumstances where “there were confidential communications likely to have affected that state of mind”.
Third, and relatedly, a mere denial by a party as to its state of mind will not be sufficient to give rise to an inconsistency constituting waiver. Something more is required. Similarly, “a pleading of reliance, without more, will not usually manifest inconsistency”. However, “If a party by his or her conduct expressly or impliedly discloses or makes an assertion about matters to which privilege would apply, fairness to the other party may dictate that the party’s conduct should be taken as a waiver of any privilege attaching to that matter”.
Fourth, the authorities reveal that each case will “depend on its own facts and circumstances”, which may give rise to the inconsistency necessary to constitute a waiver of privilege. As a result, “other cases in which implied waiver has been considered provide limited guidance unless they arise out of similar facts”.
Fifth, it is trite that “the evidence adduced” by a party “otherwise entitled to the privilege” might “render reliance on the privilege unjust”. Thus, privilege in any “communications recorded in, or in any advice which could be inferred from the contents of” an affidavit will be “waived upon its service”.
Sixth, and relatedly, “the court is not confined to the pleadings. It is entitled to take into account the evidence put in a case, and the steps taken in the conduct of a proceeding”. In this context, the Court may have regard to the manner in which a party has “sought to deploy their contentions…in the conduct of the proceeding” in assessing whether there is a “forensic unfairness…and therefore the requisite inconsistency”. This may include the service of witness outlines.
Fonterra relies upon three matters in asserting that Bega has acted inconsistently with the maintenance of legal professional privilege in documents concerning the TMLA negotiations, being:
(a) Bega’s delivery of a position paper to Fonterra in 2017, in which it advanced its contention that the proper construction of the disputed clauses is that Fonterra’s exclusive licence was limited to natural cheese products, necessarily put in issue its state of mind with respect to the disputed clauses;
(b) Bega’s pleading in paragraphs 28D and 28I(a) of its defence to Fonterra’s rectification claim is said to have went beyond a mere denial of Fonterra’s allegations regarding its state of mind; and
(c) the contents of the witness outline of Mr Barry Irwin AM, served by Bega in the months prior to trial, which Fonterra says is at odds with what Mr Irwin conveyed to Bega’s members in the disclosure statement issued in 2001 referred to in paragraph 35(e) above.
Bega submitted that there had been no waiver of privilege in the TMLA documents. First, the position paper delivered in 2017 was delivered prior to the commencement of the proceeding, and has not been relied upon by it for the purpose of advancing its case at trial. Secondly, its pleadings in relation to Bega’s state of mind are purely defensive, and Bega has not advanced a positive case regarding its state of mind. Finally, the authorities make it clear that the service of witness outlines (as opposed to the reading of affidavits or the giving of oral evidence in open court) cannot waive privilege in any underlying privileged documents.
In my view, there has been no inconsistent conduct on the part of Bega which would be inconsistent with its maintenance of privilege in the TMLA negotiation documents. As I indicated during the course of the hearing, the provision of the position paper is not qualitatively different than the issue of a letter of demand. Without more, a statement of a party as to the legal consequences of a contractual term or a course of conduct cannot amount to a waiver of the legal advice which informed a party’s decision to make such an assertion.[6] Furthermore, as noted by senior counsel for Bega, the delivery of the position paper pre‑dated the issue of the proceeding. While I doubt that the authorities completely preclude there being held to be any implied waiver arising out of any alleged deployment of legal advice outside the litigation context, as asserted by Bega, it is correct that the authorities tend to focus upon the conduct of parties in the course of litigation.[7]
[6]See QUBE Logistics (Vic) Pty Ltd v Wimmera Container Line Pty Ltd [2013] VSC 695 [127].
[7]See, for example, Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341.
Further, I agree that Bega’s pleading in its defences does not go any further than denying the allegations in Fonterra’s statement of claim. In its statement of claim at paragraph 30, Fonterra pleaded that Bonlac/NZDB understood, and considered to be essential, that the disputed clauses restricted Bega from using the Bega trade marks in Australia (‘understanding’). In paragraph 31, Fonterra pleaded that Bega was informed that Bonlac/NZDB were proceeding on the basis of the understanding, and in paragraph 32, stated that at no time did Bega take any steps to qualify or dispute the understanding. At paragraph 33, Fonterra pleaded that, if Bonlac/NZDB’s understanding was incorrect, it was unconscionable for Bega to execute the TMLA without taking steps to correct the understanding.
Alternatively, at paragraph 36 of the statement of claim, Fonterra pleaded that it was the common intention of the parties that the disputed clauses restricted Bega’s ability to use the Bega trademarks on any products in Australia, consistent with the understanding.
Fonterra bases its claim that, by its pleading, Bega put its state of mind in issue:
(a) in paragraph 28D of the defence and counterclaim, where Bega denied Fonterra’s allegation that it was informed of, and knew, that Bonlac/NZDB were proceeding on the basis of the understanding; and
(b) in paragraph 28I(a), where Bega denied the allegation that there was a common intention to the effect of the understanding, and said:
at no time did it have an intention that [the disputed clauses] would restrict Bega from using the Bega trademarks …
However, the pleading in paragraph 28D is no more than a bare denial of the allegation in paragraph 31 of the statement of claim. Further, while at first glance the pleading in paragraph 28I(a) of the defence and counterclaim does appear to be putting Bega’s state of mind in issue, that pleading needs to be read in the context of the paragraph of the statement of claim to which it responds. Paragraph 36 of the statement of claim in effect contains a rolled up plea constituting three elements, being:
(a) an intention on the part of Bonlac/NZDB;
(b) an intention on the part of Bega; and
(c) that intention was common to both parties.
In my view, the pleading in paragraph 28I(a) does no more than clarify that Bega denies that it had the pleaded intention, and, accordingly, there was no common intention of the kind asserted by Fonterra.
Finally, the service of Mr Irwin’s witness outline does not, of itself, give rise to any waiver. It seems to be accepted by the authorities that there is no waiver of any privilege in any documents which might inform the state of mind of a witness until an affidavit is read in open court or a party gives evidence on oath at trial.[8] The current case is to be contrasted with the position in Oswal (Ruling No 5),[9] where not only had the relevant party filed outlines of evidence, but had made assertions about its proposed witnesses’ state of mind in its pleadings, and sought to deploy its state of mind during the course of more than one interlocutory skirmish, and in opening its case at trial. Here, as senior counsel for Bega observed, Bega has been at pains not to deploy evidence or submissions of that nature at trial.
[8]See Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283.
[9]The Oswal matters [2017] VSC 19.
Accordingly, Fonterra’s application for production of the TMLA negotiation documents on this ground fails.
Section 125 of the Evidence Act
The question arises then, whether there are reasonable grounds to find that the documents were communications made or documents prepared in furtherance of a fraud, that is, in furtherance of a deliberate scheme on the part of Bega to withhold from Fonterra its view that the disputed clauses were not consistent with the understanding, that is, that Fonterra be provided with an exclusive licence with respect to the Bega brand, such that Bega was precluded from using the Bega brand on all products in Australia without Fonterra’s consent.
Of course, the question of what the disputed clauses mean is a live issue within the proceeding, and no light can be shed on that question by the production of privileged documents, which, at their highest, would only likely to disclose a lawyer’s opinion regarding the construction of the disputed clauses. However, they are relevant to Fonterra’s rectification claim, given that, in cases of unilateral mistake, the party seeking rectification must establish unconscionable conduct on the part of the other parties. As noted in the extract of Heydon on Contract[10] relied upon by Fonterra, rectification may be available ‘where one party believes a particular term is to be included in a contract, the second knows, or perhaps suspects … this, and the second omits the term’.[11] This is what Fonterra said took place in the current case: Bega knew that an exclusive licence for all products was a ‘deal breaker’ for Bonlac/NZDB, but kept silent on the matter after it had formed a view that a less expansive construction of the disputed clauses was available, and, arguably, likely.
[10]JD Heydon, Heydon on Contract (Law Book Co, 2019).
[11]Ibid, [30.520].
The questions which arise in this aspect of the application are:
(a) is there a reasonable basis for finding that Bega knowingly withheld from Fonterra its view that the disputed clauses were not effective to convey that Fonterra had bargained for, being an exclusive licence to use the Bega brand on all products in Australia, not just natural cheese products;
(b) if so, does that conduct, or could that conduct amount to ‘fraud’ within the meaning of s 125 of the Act; and
(c) if so, were the documents sought by Fonterra made or prepared for the furtherance of the fraud, that is, for the purpose of effecting the ongoing concealment of the true meaning of the disputed clauses from Fonterra?
Prior to turning to the resolution of these questions, it is necessary to deal with three aspects of Bega’s submissions advanced in opposition to Fonterra’s application. First, Bega submitted, Fonterra’s application was too late, coming many months after the bulk of the challenged documents were discovered, and after the commencement of the trial. Secondly, Bega submitted that the application would be futile, because the application would be unlikely to be heard or determined prior to Fonterra closing its case. Thirdly, senior counsel for Bega submitted that I should be cautious to find that Bega has lost privilege in documents concerning the negotiation of the TMLA in circumstances where the trial is under way, and the trial judge has made a number of observations during the running of Fonterra’s case which might lead one to conclude that the trial judge did not consider that Fonterra had proved its case with respect to its rectification claim.
Taking the question of delay first, I agree that Fonterra’s delay in making this application is extremely unfortunate, and largely unexplained. However, this is largely beside the point. This is not an example of an application where Fonterra is asking the Court for an indulgence, or is otherwise seeking that the Court exercise a discretion in its favour. Rather, the question is whether, in accordance with the statutory test set out in s 125 of the Act, Bega has lost privilege in some or all of the documents for which it has claimed privilege. This is a binary question, which requires an evaluative, not a discretionary judgment. It may be that the trial judge, in the event that any additional documents are produced, in the exercise of his case management powers, may refuse to allow Fonterra to recall witnesses or to re‑open its case by reason of Fonterra’s delay, but that is not a question for determination here.
Similarly, because the trial judge would have the power to allow Fonterra to call additional witnesses or re‑open its case, it could not be said that the application is necessarily futile. At the time of the hearing of the application, Fonterra had not closed its case, and I had not received any further information on that question prior to making my determination upon this question.
Further, while I agree that one must be cautious of making findings of fraud, even on a tentative basis, and that there is some awkwardness in hearing an application of the current kind while the trial is under way, these matters provide no barrier to determining Fonterra’s application on its merits. First, the terms of s 125 of the Act make it clear that it is open to the Court to make a finding that there are reasonable grounds for finding fraud on a preliminary basis, notwithstanding that the question of whether a fraud (however defined) has been committed is a fact in issue in the proceeding. In my view, the use of the phrase ‘reasonable grounds for finding’ in s 125 of the Act impliedly abrogates the operation of the Briginshaw[12] principle with respect to findings of fraud and other serious allegations. As I observed in Cargill Australia Ltd v Viterra Malt Pty Ltd & Ors,[13] s 125 of the Act contemplates the possibility of a finding that attracts the operation of s 125 of the Act being made ‘in less than perfect circumstances and upon less than perfect material’.[14]
[12]Briginshaw v Briginshaw (1938) 60 CLR 336.
[13][2017] VSC 126.
[14]Ibid [196].
Finally, I doubt whether any remarks made by the trial judge during the course of the trial to date are of any particular relevance to the determination of this application. As noted above, I need to make a determination on the evidence before me, against a standard far less exacting than that which will ultimately need to be applied by the trial judge, given the serious nature of the allegations made by Fonterra. Further, his Honour’s remarks and observations are just that: remarks and observations, in circumstances where, at the time of the hearing of these applications, Fonterra has not yet closed its case. Setting aside for the moment the question of whether any of the TMLA negotiation documents are actually caught by the operation of s 125 of the Act, the practical outcome of this application, if any, is that it may require the disclosure of documents which may be admissible at trial, and may be of forensic value to one or both parties at trial. That is a far cry from finding after a full trial that Bega has in fact engaged in unconscionable conduct of a kind which would enable Fonterra to the relief of rectification.
In summary, my views on this aspect of Fonterra’s application are as follows:
(a) on the basis of the evidence before me, and having regard to the relatively low threshold imposed by s 125 of the Act, there are reasonable grounds to find that Bega had deliberately concealed its opinion that the disputed clauses did not confer upon Fonterra the exclusive licence of the character that was of central importance to it, and as such, engaged in unconscionable conduct;
(b) furthermore, the preponderance of authority in this jurisdiction is that unconscionable conduct of the kind described above falls within the definition of fraud within s 125 of the Act.[15] The conduct which (if proved) Fonterra relies upon to support its right to the relief of rectification is the same conduct which calls s 125 of the Act into operation; and
(c) however, having inspected all of the TMLA negotiation documents, there are no documents which could be held to have come into existence ‘for the furtherance of’ any fraud. For completeness, while I accept that Fonterra’s suspicions may have been aroused by the dates and descriptions of the TMLA negotiation documents, my conclusion in that regard is, at least in my mind, free from any doubt after inspecting the TMLA negotiation documents.
[15]Amcor Ltd v Barnes [2011] VSC 341.
Finally, Fonterra applied to inspect document 16 (BEG.007.006.0063) in full pursuant to s 126 of the Act, on the basis that it is necessary to inspect the parts of the document which are redacted in order to fully comprehend the contents of the remainder of the document. Having inspected the redacted portions of the document, I disagree.
Bega’s application
In its summons filed 22 January 2020, Bega sought the production of documents concerning the provenance of the cheese used in Bega branded products. These documents are said to be protected from disclosure on the basis of legal professional privilege.
Bega’s provenance claim is based upon cl 7.3 of the TMLA, which provides as follows:
Subject to Bega’s obligation under the Product Supply Agreement, the Licensee will be solely responsible for ensuring compliance with all legal, statutory, regulatory and other requirements relating to labelling, packaging, advertising, distribution, sale, manufacture and other such like matters in connection with the Products and the Trade Mark.
In its outline of opening submissions at trial, Bega stated as follows:
Two thirds of Bega branded cheese is not made in the Bega Valley. However, in its public presentation of the brand and the Branded Products, Fonterra has (with varying degrees of explicit language) conveyed or invited consumers to assume that Bega branded cheese comes from the Bega Valley.
Bega in its outline then went on to outline the promotional activities, packaging and publications which caused it concern that Fonterra had breached the Australian Consumer Law, which prohibits a person from engaging in misleading and deceptive conduct in trade or commerce. Bega raised these concerns with Fonterra, and on 29 October 2018, served a Notice of Breach upon Fonterra, which asserted that Fonterra had breached cl 7.3 of the TMLA. Bega alleges that Fonterra has failed to remedy the breach, thus (as Bega contends) entitling Bega to terminate the TMLA.
On 28 May 2015, Mr Griffin prepared a draft Discussion Paper titled ‘Review of Cheese Manufacturing Assets in Northern Victoria’ following a meeting between representatives of Fonterra and Bega on 22 May 2015. Paragraph 5 of this paper (which was headed ‘Private & Confidential’) (‘confidential discussion paper’) stated as follows:
Bega continues to express concern over the provenance of the Bega brand and in particular the origin of the cheese that goes into the Bega pack. Bega’s strong preference is that all cheese going into the NCC Bega brand for the domestic market is made at Lagoon St. This would need approx. 15,000 mta of bulk cheese.
Fonterra has advised they have formal legal advice confirming the bulk cheese into the Bega brand does not need to come from Bega.
Bega seeks production of the ‘formal legal advice’ on the basis that privilege has been waived pursuant to s 122(3)(a) of the Act.
Bega also challenges Fonterra’s claim to privilege in redacted portions of two other documents, being:
(a) an email from Briony Delaney of Fonterra to Kiril Simonovski of Fonterra dated 27 April 2018; and
(b) an email from Kirsty Wilson of Fonterra to Mr Simonovski of Fonterra dated 17 March 2016.
Ms Whiting deposed that it is not apparent on the face of the emails that the redacted portions record legal advice from Fonterra’s internal legal counsel, Mr Jared Pereira, despite Fonterra’s assertions in that regard. Having inspected the unredacted documents, I accept that the redacted portions of the documents either seek legal advice, or record communications which seek legal advice, or are made to lawyers for the purposes of seeking legal advice.
Turning now to the ‘formal legal advice’ referred to in the confidential discussion paper, s 122(5)(a)(i) of the Act provides as follows:
A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of evidence merely because –
(a) the substance of the advice has been disclosed –
(i) in the course of making a confidential communication or preparing a confidential document …
The use of the word ‘merely’ indicates that, if a person discloses the substance of its legal advice in the course of a confidential communication, this is not a complete answer to the question of whether there has been a waiver of legal privilege.
Here, Bega contends that Fonterra has disclosed the ‘gist’ of its legal advice with respect to the provenance issue in a meeting with Bega. Fonterra has not said that the advice does not exist in documentary form, and there is no reason to believe that Mr Griffin’s statement in the confidential discussion paper as to what Bega’s representatives were told was incorrect. Bega submitted that the substance of the advice is clearly disclosed.
In response, Fonterra referred to a number of authorities that any waiver based upon an alleged disclosure of legal advice must be clear and unequivocal. Even if the relevant passage in the confidential discussion paper is correct (which Fonterra says has not been established by the evidence), the statement in the confidential discussion paper merely exposes the ultimate conclusion of the advice in highly generalised terms, not the substantive reasoning behind the ultimate conclusion.
I agree. The statement in the confidential paper does no more than expose the fact that, in response to Bega’s concerns that Fonterra’s approach to marketing Bega branded products may be contravening the Australian Consumer Law, Fonterra stated that it had ‘formal’ legal advice supporting its position. The question of whether Fonterra has breached, or was at risk of breaching, the Australian Consumer Law is one of considerable legal and factual complexity. The statement in the confidential position paper does not reveal the substance or the reasoning of Fonterra’s legal advice beyond its ultimate outcome. If the statement had gone on to explain why Fonterra was not at risk that would have been a different matter. However, here there has been no clear and/or unequivocal disclosure of the substance of the advice, as required by the authorities.[16]
---
[16]See Mullett v Nixon [2016] VSC 129; Banksia Securities Limited v The Trust Company [2017] VSC 583.
SCHEDULE OF PARTIES
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 |
| - and - | |
| BEGA CHEESE LIMITED (ACN 008 358 503) | Defendant/Plaintiff by Counterclaim |
10
0