Fonterra Brands Australia Pty Ltd v Bega Cheese Ltd (No 5)
[2020] VSC 72
•26 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) | First Plaintiff/First Defendant by Counterclaim |
| and | |
| 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: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 February 2020 |
DATE OF JUDGMENT: | 26 February 2020 |
CASE MAY BE CITED AS: | Fonterra Brands Australia Pty Ltd & Anor v Bega Cheese Ltd (No 5) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 72 |
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PRACTICE AND PROCEDURE – Application for leave to file expert reports – Reports served two months after commencement of trial – No notice given of intention to file reports – No application made for directions in relation to expert evidence – Application for leave to file expert reports refused – Civil Procedure Act 2010 (Vic) ss 7(1), 9(1), 65F, 65G, 65H – Competition and Consumer Act 2010 (Cth) sch 2 Australian Consumer Law ss 18, 29(1)(k).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G Dalton QC with Mr P Creighton-Selvay | Arnold Bloch Leibler |
| For the Defendants | Dr C Button QC with Mr B Holmes | Gilbert + Tobin |
HIS HONOUR:
The trial of this proceeding commenced on 18 November 2019. Following five days of opening submissions the parties participated in a lengthy mediation, which did not result in a resolution of the proceeding. The trial resumed on 6 December 2019 with a further five days of hearing concluding on 17 December 2019. A number of interlocutory applications were heard in late January 2020. The trial resumed on 3 February 2020.
On 23 January 2020, Gilbert + Tobin served on Arnold Bloch Leibler an expert witness report of Mr Toby Ralph, dated 22 January 2020.[1] On 24 January 2020, Gilbert + Tobin served on Arnold Bloch Leibler an expert witness report of Gerard Bardsley.[2] By letter dated 30 January 2020, Arnold Bloch Leibler advised Gilbert + Tobin that Fonterra Brands (Australia) Pty Ltd (Fonterra) opposed Bega Cheese Ltd (Bega) having leave to rely on the Bardsley and Ralph reports.[3]
[1]Plaintiffs’ written submissions filed 10 February 2020 at para [1].
[2]Ibid.
[3]See exhibit JMW-1 to the affidavit of Janet Mary Vivienne Whiting sworn 6 February 2020.
The Court was informed of the existence of a dispute regarding Bega’s reliance on the Bardsley and Ralph reports on 3 February 2020.[4] On 4 February 2020, directions were made for the filing of submissions and affidavits in support of the parties’ competing contentions. Bega filed three affidavits of Ms Janet Whiting in support of the application for leave to rely upon the expert reports.[5] Fonterra filed two affidavits of Mr Matthew Lees in opposition.[6] The application was heard on 17 February 2020. On 20 February 2020, I informed the parties that Bega’s application for leave to file the expert reports of Mr Bardsley and Mr Ralph was rejected.[7] I advised the parties that I would publish written reasons for dismissing the application on 26 February 2020.[8]
[4]Transcript of proceedings, 3 February 2020 at pp 1020-1.
[5]See the affidavits of Janet Mary Vivienne Whiting sworn 6, 11 and 13 February 2020.
[6]See the affidavits of Matthew David Lees sworn 14 and 17 February 2020.
[7]Transcript of proceedings, 20 February 2020 at p 2009.
[8]Ibid.
On 8 May 2001, Bega and Fonterra entered into a Trade Mark Licencing Agreement (TMLA).[9] Fonterra’s name at the time was ‘ConsumerCo Pty Ltd’. Bega’s name at the time was ‘The Bega Cooperative Society Ltd’. Pursuant to cl 3.1 of the TMLA, Bega granted Fonterra a ‘sole and exclusive’ licence of the ‘[t]rade [m]arks’ in the ‘[t]erritory’ (being Australia except New South Wales and the ACT) ‘on or in relation to [p]roducts for sale in the [t]erritory.’[10] The licence was granted for a period of 25 years, subject to the exercise of renewal rights granted to Fonterra pursuant to cl 2 of the TMLA,[11] and certain termination rights held by Bega.
[9]FON.001.001.0832.
[10]Ibid 0846.
[11]Ibid.
On the same day, 8 May 2001, Bega entered into an agreement with Bega Cheese Trading Pty Ltd, an entity wholly owned by Bega which, as part of a suite of agreements executed on 8 May 2001, was purchased by Fonterra[12] and subsequently renamed Bonland Cheese Trading Pty Ltd (Bonland).[13] The agreement is substantially in the same terms as the TMLA, save that the ‘territory’ is defined as New South Wales and the ACT.
[12]Document titled ‘Share Sale Deed’ at FON.001.001.0093.
[13]FON.001.001.0779.
In proceedings commenced by writ filed 11 December 2017, Fonterra claims that the TMLA conferred upon it the exclusive right to utilise the Bega brand in the territory. It submits that Bega has no right to apply the Bega brand to any products. It submits that Bega’s conduct in, inter alia, utilising the Bega brand to market products such as peanut butter, constitutes a breach of the TMLA.[14] Fonterra submits, in the alternative, that if the TMLA does not confer upon it the exclusive right to utilise the Bega brand, the TMLA should be rectified so as to achieve this result.[15]
[14]Paragraph [24] of the Fourth Further Amended Statement of Claim.
[15]Ibid para [38].
On 23 March 2018, Bega filed a counterclaim. It alleges that Fonterra has breached various terms of the TMLA, thereby entitling it to terminate the TMLA.
Clause 7.3 of the TMLA provides:
Subject to Bega’s obligations 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 Marks.[16]
[16]FON.001.001.0856.
Bega alleges that Fonterra has represented to consumers since 2008 that all cheese in Bega branded products is from the Bega valley. The particulars of this allegation contend that the representation was conveyed through Fonterra’s:
(a)promotion, advertising and marketing campaigns in relation to Bega branded products;
(b)hosting of the website in relation to the Bega branded products; and
(c)the packaging of the brand of products.[17]
[17]See the Fourth Further Amended Defence to the Second Further Amended Statement of Claim and Counterclaim at para [73] and Note on Bega’s Provenance Claim filed 24 January 2020 (Provenance Note) at DEF.0009.0004.0638, 0661.
Bega alleges that the representation that all cheese and Bega branded products is from the Bega valley is not true for the reason that all cheese and Bega branded products have not and do not come from the Bega valley.[18]
[18]See the Fourth Further Amended Defence to the Second Further Amended Statement of Claim and Counterclaim at para [74] and the Provenance Note.
Bega alleges that Fonterra has contravened ss 18 and/or 29(1)(k) of the Australian Consumer Law[19] (ACL) by making a representation which is false or misleading as to the place of origin of Bega branded products.[20]
[19]See Competition and Consumer Act 2010 (Cth) sch 2.
[20]See the Fourth Further Amended Defence to the Second Further Amended Statement of Claim and Counterclaim at para [77].
Bega alleges that Fonterra’s contravention of cl 7.3 of the TMLA by reason of breach of ss 18 and 29(1)(k) of the ACL, confers upon it a right to terminate the TMLA.
Clause 16.1(a) of the TMLA provides that Bega may, by giving not less than 90 days prior written notice to Fonterra, terminate the agreement if Fonterra fails to observe or perform any of the terms of the TMLA ‘which has a material adverse effect on Bega, and to remedy the same within the period specified in a notice given by Bega to Fonterra calling for a remedy, being a period of not less than 90 days.’
On 29 October 2018, Bega served a notice on Fonterra alleging a breach of cl 7.3 by reason of Fonterra’s alleged contravention of s 29(1)(k) of the ACL.[21]
[21]FON.012.001.0809, 811-2.
Bega also alleges that Fonterra has breached cls 6.1 and 6.3 of the TMLA. Clause 6.1 requires Fonterra, consistent with the Agreed Marketing Principles (as set out in Schedule 2 of the TMLA) to promote and develop sales of Branded Products, and to ensure that when using any Bega trade mark on or in relation to any Product, the good name and image of the trade mark is maintained and not harmed.[22]
[22]See the Fourth Further Amended Defence to the Second Further Amended Statement of Claim and Counterclaim at para [63].
Clause 6.3 provides that Fonterra must:
conduct its business operations, including its handling of credit arrangements and its servicing of [c]ustomers, in accordance with appropriate business standards applying in the Territory from time to time and in a manner not to damage the value of the Trade Marks, such conduct extending but not being limited to promotional, marketing and advertising policies and content.
On 8 June 2018, Bega served a notice of breach on Fonterra pursuant to cl 16.1(a) alleging breaches of cls 6.1 and 6.3 of the TMLA.[23] Bega alleges that the breaches of cls 6.1 and 6.3 had a material adverse effect, being damage caused to the goodwill associated with the Bega trade mark and profits it has lost by reason of Fonterra’s failure to comply with cl 6.1 and cl 6.3.[24]
[23]BEG.014.002.0013.
[24]Ibid.
Mr Bardsley is a senior research director in the Sydney office of Roy Morgan Research.[25] On 29 November 2019, Gilbert + Tobin instructed Roy Morgan Research to design and conduct a survey in relation to Bega branded cheese and to provide a report setting out:[26]
·where consumers thought Bega branded cheese was made;
·why they had a belief as to where Bega branded cheese was made; and
·what recall they had of the ‘Real Town, Real Cheese’ advertisements run by Fonterra in relation to the Bega brand.
[25]See expert report of Gerard Bardsley filed 30 January 2020 at annexure 3.
[26]Ibid annexure 1.
Roy Morgan Research conducted an online survey between 13 December and 18 December 2019 of grocery buyers aged 18 years and older who have purchased cheese in the preceding 12 months.[27] The online survey was completed by 1146 respondents.[28]
[27]Ibid p 3.
[28]Ibid p 6.
Bega wishes to rely upon the Bardsley report in support of its claim that Fonterra has contravened ss 18 and 29(1)(k) of the ACL, thereby breaching cl 7.3 of the TMLA and enlivening a right of termination under cl 16.1(a).
On 4 December 2019, Gilbert + Tobin instructed Mr Toby Ralph to provide a report considering the effect of Fonterra’s marketing strategy on Bega’s brand equity and its position within the market to date, including the potential impact of the strategy in the future.[29] Bega wishes to rely upon the Ralph report in support of its contention that Bega has breached cls 6.1 and 6.3 of the TMLA. It also wishes to rely upon the evidence in support of its contention that Fonterra’s marketing of Bega products constitutes a material adverse effect within the meaning of cl 16.1(a) of the TMLA.
[29]DEF.0009.0010.0151.
The proceeding was commenced by writ filed on 11 December 2017. Bega’s counterclaim was filed on 23 March 2018. On 15 June 2018, Elliott J made comprehensive pre-trial orders. Those orders included at [11]:
The parties each serve on the opposing party a draft letter of instruction they propose to send each of their expert witnesses, without identifying the relevant expert witness, by 4.00pm on 29 June 2018.
Elliott J explained the rationale for making this order as follows:
I am not going to require the parties to identify who their experts are, but I do think there’s some utility in providing a letter redacted or in draft either way, which is proposed to be sent to the experts, to the other side, so they know what it is that it is going to be the subject of expert evidence from the other side that will assist in the parties being on the one page, so to speak, with respect to the expert evidence.[30]
[30]Transcript of proceedings, 15 June 2018 at p 26, lines 4-11.
No draft letter of instruction to Messrs Bardsley and Ralph was provided to Arnold Bloch Leibler at any time prior to the service of the reports on 23 and 24 January 2020. As was conceded by Dr Button QC, who appeared with Mr Holmes on behalf of Bega, the failure to provide Arnold Bloch Leibler with a draft of the letters of instruction to Messrs Bardsley and Ralph constituted a breach of the order made on 15 June 2018.[31]
[31]Transcript of proceedings, 20 February 2020 at p 1860, line 21-2.
In addition to breaching the direction of Elliott J, Bega failed to comply with s 65G(1) of the Civil Procedure Act 2010 (Vic) (Civil Procedure Act), which provides:
Unless rules of court otherwise provide or the court otherwise orders, a party must seek direction from the court as soon as practicable if the party –
(a) intends to adduce expert evidence at trial; or
(b) becomes aware that the party may adduce expert evidence at trial.
Section 65G is in Part 4.6 of the Civil Procedure Act. Section 65F provides that the main object of Part 4.6 is to further the overarching purpose prescribed by the Civil Procedure Act by:
(a)enhancing the case management powers of a court in relation to expert evidence in civil proceedings;
(b)restricting expert evidence to that evidence which is reasonably required to resolve a civil proceeding; and
(c)emphasising the primary duty of an expert witness to the court.
The overarching purpose referred to in s 65F is that prescribed by s 7(1), which provides:
The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute.
Section 7(1) must be read in conjunction with s 9(1), which provides that in making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects:
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the Court;
(d) the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for –
(i) the fair and just determination of the real issues in disputes; and
(ii) the preparation of a case for trial.
(f) the timely determination of a civil proceeding;
(g) dealing with a civil proceeding in a manner proportionate to –
(i) the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
Bega’s conduct in serving two substantial expert reports on 23 and 24 January 2020 without prior notice to Fonterra or the Court is inconsistent with the object prescribed in s 65F(a) of the Civil Procedure Act of enhancing the case management powers of the Court in relation to expert evidence in civil proceedings. It also undermines the overarching purpose of facilitating the just, efficient, timely and cost effective resolution of the real issues in dispute.
The letter of instruction from Gilbert + Tobin to Mr Bardsley is dated 29 November 2019. The letter of instruction to Mr Ralph is dated 4 December 2019. Between 4 December and 17 December 2019, there were five days of hearing. Bega could have given the Court and Fonterra notice of its intention to seek to adduce further expert evidence. No explanation has been provided for the failure of Bega to do so.
Bega has had ample opportunity to prepare all of its evidence in advance of the trial commencing on 18 November 2019. Bega’s claim that Fonterra has breached cls 6.1 and 6.3 (in respect of which it seeks to rely upon the Ralph report) was first pleaded on 23 March 2018. Bega’s claim that Fonterra has breached cl 7.3 (in respect of which it seeks to rely upon the Bardsley report) was first pleaded on 8 April 2019.
The proceeding was adjourned on 17 December 2019 to accommodate the Christmas/New Year break. Prior to the adjournment, Bega was directed to file a written submission addressing, inter alia, the principles which apply in assessing whether conduct is misleading or deceptive, including in relation to implied representations.[32]
[32]Transcript of proceedings, 17 December 2019 at p 833, lines 9-12.
Bega’s Provenance Note was filed on 24 January 2020. The submission included the following (citations omitted):
[t]he essential question is always whether the impugned conduct taken as a whole has a tendency to lead a person into error. This is an objective exercise, and not to be confused with questions of reliance or whether misleading conduct has caused a person any loss. For example, an advertisement may contravene s 18 of the ACL even though it does not result in any member of the target audience actually purchasing goods or services under its influence. As noted in Miller’s:
[i]n considering whether or not an advertisement is misleading or deceptive, the question is whether it is apt to induce consumers to deal with the advertiser rather than one of its competitors, on the basis of an erroneous belief engendered by advertisement, not whether the tendency of the advertisement was apt to induce consumers to enter into contracts with the advertiser.
The learned author of Miller’s cites ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 … as authority for this proposition. In that case, the High Court noted at [50] that:
It has long been recognised that a contravention of s 52 of the TPA may occur, not only when a contract has been concluded under the influence of a misleading advertisement, but also at the point where members of the target audience have been enticed into the ‘marketing web’ by an erroneous belief engendered by the advertiser, even if the consumer may come to appreciate the true position before a transaction is concluded.
This example also illustrates the principle that it is not necessary to show that the conduct actually misled or deceived anyone: conduct will be likely to mislead or deceive if there is a ‘real or not remote chance or possibility’ of the conduct leading someone into error.
When considering how a reasonable member of the class might view the relevant conduct, ‘it needs to be borne in mind that there can be more than one reasonable response in any given circumstances. Personal capacity and experience differ and frequently, different people, acting reasonably, will respond in different ways to the same matter. The test of reasonableness involves considering the boundaries of the range of those responses…’. In a context such as a purchasing of a staple product in a supermarket (such as bread), the ordinary or reasonable person will not likely spend any time undertaking an intellectualised process of analysis.
The question to be asked is not whether someone was misled and purchased Bega products as a result: it is whether there is a ‘real or not remote chance or possibility’ that “members of the target audience have been enticed into the ‘marketing web’ by an erroneous belief engendered by the advertiser, even if the consumer may come to appreciate the true position before a transaction is concluded.’ Bega submits that the answer to this question is clearly ‘yes’.[33] (original emphasis)
[33][10]-[12], [16] and [100] of Bega’s Provenance Note.
Bega’s submission that the test for determining whether a representation is misleading or deceptive is objective, and it is not necessary to show that the conduct actually misled or deceived anyone, is correct. Fonterra does not advance a contrary submission. Both Bega and Fonterra appear to endorse the observations of Murphy J in ACCC v King Island Meatworks and Sellers Pty Ltd:[34]
Evidence that some person has in fact been misled is neither required nor conclusive. The question as to whether conduct is misleading or deceptive is an objective one for determination by the Court having regard to all relevant facts.[35]
[34](2012) FCA 859.
[35]Ibid at [62].
Bega’s claim that Fonterra engaged in misleading and/or deceptive conduct in contravention of ss 18 and 29(1)(k) of the ACL was first pleaded on 8 April 2019. Bega is a substantial corporation. In the current proceedings it has substantial legal resources at its disposal. The Bega legal team comprises two silks and two juniors. Counsel are instructed by Gilbert + Tobin, a firm with substantial experience in commercial litigation. I infer that prior to the commencement of the trial, and in particular during the period post 8 April 2019, Bega had ample opportunity to consider the evidence it should lead in support of its claim that Fonterra has breached ss 18 and 29(1)(k) of the ACL. I infer that, consistent with the written submission filed on 24 January 2020, Bega proceeded until the eve of the trial on the basis that in order to prove its case it does not need to establish that any consumer has actually been misled by any conduct by Fonterra.
Market research may be admissible to assist a court in determining, objectively, whether a representation is misleading or deceptive.[36] Notwithstanding judicial recognition that survey evidence may be admissible, Dr Button QC was not able to point to any authority in which survey evidence has actually formed the basis, in part or whole, for a court’s conclusion that the objective test for determining whether a representation is misleading or deceptive, has been satisfied. My own research has not identified any such authority. On the other hand, there are a number of authorities in which survey evidence has been held to be of no probative value in support of a claim of misleading and/or deceptive conduct.[37]
[36]See, for example, Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313.
[37]Telstra Corporation Ltd v Phone Directories Co Pty Ltd (2014) 316 ALR 590, 659 at [332] per Murphy J; Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (2015) 113 IPR 11 at [346] per Nicholas J; Australian Postal Corporation v Digital Post Australia (2013) 308 ALR 1, 11 at [49] per North, Middleton and Barker JJ.
Further, notwithstanding Bega’s contention that it is not necessary in order to establish contravention of ss 18 and 29(1)(k) ACL to prove that any consumer has in fact been misled, it has already filed evidence of a market research study going to this very point.[38] As set out in its submission dated 24 January 2020, Bega submitted:
[w]hen Bega commissioned a study, it found that nearly half of respondents thought that Bega cheese was made in Bega, and the proportion who thought that leapt to 78% after seeing the ‘Real Town, Real Cheese’ commercial. Research commissioned by Fonterra found a 10% increase in the perception that Bega cheese ‘is made in a special place’ post the ‘Real Town, Real Cheese’ commercial.[39] (original emphasis)
[38]See document titled ‘Bega Cheese Provenance & Brand Survey’ dated 15 May 2018 at BEG.009.009.0438.
[39]Bega’s Provenance Note at [101].
Thus, there is already evidence before the Court in the nature of a market research survey of consumer reactions to Fonterra’s advertising of the Bega brand. The weight to be attached to this evidence will be a matter for submissions. By seeking to rely upon the Bardsley report, Bega is seeking to add to the market research evidence which is already before the Court. If minded to do so, Bega had ample opportunity to prepare and file further market research evidence prior to the commencement of the trial.
Section 65H(1) and (2) of the Civil Procedure Act provides:
(1)A court may give any directions it considers appropriate in relation to expert evidence in a proceeding.
(2) A direction under sub-section (1) may include, but is not limited to –
(a) the preparation of an expert’s report;
(b) the time for service of an expert’s report;
(c) limiting expert evidence to specified issues;
(d)providing that expert evidence may not be adduced on specified issued;
(e)limiting the number of expert witnesses who may be called to give evidence on a specified issue;
(f) providing for the appointment of –
(i) single joint experts; or
(ii) court appointed experts.
(g)any other direction that may assist an expert witness in the exercise of his or her functions as an expert witness in the proceeding.
There are sound reasons why a party wishing to adduce survey evidence should obtain directions from the Court. Absent directions being made survey evidence has the potential to generate dispute as to both the admissibility and weight of the evidence. Such disputes undermine the overarching purpose of the efficient, timely and cost effective resolution of the real issues in dispute.
The Federal Court of Australia has a practice note governing survey evidence which was issued on 25 October 2016. That practice note includes the following:
Survey evidence can give rise to a number of problems which may result in it not being admitted into evidence or being given little or no weight. The party adducing the survey evidence is seldom in a position where it can remedy problems arising out of poor design or execution of the survey during the course of the trial. Even if a party is in a position to remedy such problems, allowing a party to do so at a late stage of the proceeding may be unfairly prejudicial to the other party and/or unduly disrupt the proceeding. It is therefore important that, at an early stage of the proceeding (and before any survey is conducted), a party proposing to adduce such evidence give close attention to the survey design and the steps that will be taken to ensure that the survey evidence is both relevant and reliable.
Experience shows that a great deal of time can be spent at the trial on evidence and submissions concerning the admissibility and/or reliability of survey evidence which, if the evidence is excluded, or given no weight, can result in a significant waste of time and costs. Any party seeking to adduce such evidence has a responsibility to take appropriate steps to ensure that the survey that is proposed to be conducted will be properly designed and executed and that the data obtained will be properly recorded and analysed. A party that fails to satisfy the court that it has done these things may find not only that the survey evidence is excluded or given little or no weight but that it is also required to pay the other party’s costs of responding to survey evidence, even if it is otherwise successful in the proceeding.[40]
[40]Federal Court of Australia, Survey Evidence Practice Note (GPN-SURV), 25 October 2016, [2.1]-[2.2].
The matters set out above are of equal relevance to a party seeking to rely upon survey evidence in proceedings in the Supreme Court of Victoria. The importance of the Court having the opportunity to exercise the case management powers prescribed in Part 4.6 of the Civil Procedure Act is reflected in the mandatory requirement that a party seek directions from the Court if the party intends to adduce expert evidence at trial, unless rules of court otherwise provide or the Court otherwise orders.
If Bega had complied with the mandatory requirement under s 65G to seek directions regarding the expert evidence it intends to adduce from Mr Bardsley, there are a number of matters which could have been addressed with a view to enhancing the probative value of the report and reducing the scope for disputation as to admissibility and weight of the evidence. For example, none of the questions in the survey underpinning the Bardsley report are couched in terms which mirror the pleaded representation in [73] of the counterclaim: “All cheese in the Branded Products is from the Bega valley”. Respondents were asked to agree or disagree with the statements:
(a) Bega cheese is made only in Bega;
(b) Bega cheese is made in Bega and also other places;
(c) Bega cheese is not made but it used to be made in Bega; and
(d) Bega cheese is not made in Bega and it has never been made in Bega.
Dr Button QC submitted that these questions direct attention to the provenance of the cheese in Bega branded products. On the other hand, Fonterra pleads that all Bega cheese is “made” in Bega in the sense that it is cut and wrapped at Bega’s premises in the Bega valley.[41] Arguably, in order for the survey results to provide probative evidence in respect of Bega’s pleaded representation, survey respondents should have been asked directly whether they believed, based on Fonterra’s marketing, that all cheese in Bega Branded Products is from the Bega valley.
[41]Fourth Further Amended Statement of Claim at para [74].
Further, there is force in Fonterra’s submission that the survey questions underpinning Mr Bardsley’s report may have produced distorted results because they are premised upon respondents assuming that Bega is an actual location. A person unaware of the fact that Bega is an actual location might less readily agree with the proposition that “Bega cheese is made only in Bega” than a person who has knowledge of the fact that Bega is an actual location.
It is not necessary to express any concluded view about the matters set out above. However, it is plain that, had Bega sought directions from the Court, there are a number of matters which could potentially have been the subject of directions from the Court with a view to lessening the scope for disputation regarding the admissibility and weight to be given to the survey. I have no hesitation in concluding that if Bega was granted leave to rely upon the Bardsley report considerable judicial resources and court time would be expended dealing with questions of admissibility and weight of the report.
The observations set out above regarding the importance of obtaining directions in respect of expert evidence apply equally to the report of Mr Ralph. Fonterra contends, with considerable force, that there is significant overlap between the matters addressed in Mr Ralph’s report and the matters set out in an expert report filed on 8 August 2019 by Bega of Dr Ross Honeywill. The Ralph report is divided into Part A (General questions regarding brand equity/brand value) and Part B (Questions regarding Fonterra’s marketing and promotion strategy). Dr Honeywill was instructed to address these matters. He has prepared a comprehensive 70 page report of 550 paragraphs. Dr Button QC conceded that there is overlap between the two reports but submitted that Mr Ralph addresses specific issues not addressed by Dr Honeywill.[42] I have read closely the letters of instruction provided to both Dr Honeywill and Mr Ralph. I am satisfied that there is a significant degree of overlap between the instructions provided to Dr Honeywill and Mr Ralph. If Bega had complied with the requirement under s 65G to seek directions from the Court an issue would have arisen as to whether a direction should have been given under s 65H(2) limiting the matters which could be the subject of Mr Ralph’s report.
[42]Transcript of Proceedings, 17 February 2020 at p 1925 lines 21-22.
Bega’s conduct has seriously undermined the object prescribed by s 65F(a). Bega has avoided the exercise of the Court’s case management powers in respect of the reports of Messrs Bardsley and Ralph. Bega failed to comply with the direction made by Elliott J on 15 June 2018. Bega has failed to comply with the mandatory obligations imposed upon it by s 65G.
It is not necessary for me to express a concluded view as to whether Bega has deliberately sought to avoid the exercise of the Court’s case management powers in s 65H. It is sufficient to record that this is the practical effect of Bega’s conduct. That conduct is deserving of criticism. No submission of substance was advanced by Dr Button QC as to why the Court would be minded to exercise the residual powers under s 65G to relieve Bega from the mandatory requirement to seek directions from the Court as soon as practicable in respect of its intention to adduce the evidence of Messrs Bardsley and Ralph. Dr Button QC submitted that s 65G should be read in the context of the overarching purpose in ss 7 and 9 of the Civil Procedure Act. I accept this submission. However, it is of no assistance to Bega. To the contrary, Bega’s disregard of the obligations imposed by s 65G is inconsistent with the efficient, timely and cost effective resolution of the real issues in dispute.
In Thomas v Powercor Australia Ltd (Ruling No 3),[43] Forrest J considered an application by the plaintiff for leave to rely on an expert report served on the eve of the trial. His Honour determined that the considerations referred to by the High Court in Aon Risk Services Australia Ltd v Australian National University[44] were relevant to whether the plaintiff should be granted leave to file the expert report served on the eve of the trial. His Honour stated:
[43][2011] VSC 391; cited with approval in Redzepovic v Western Health [2016] VSCA 251 at [111]; Northern Health v Kuipers [2015] VSCA 172 at [29].
[44](2009) 239 CLR 175 at 217, [111]-[113].
Aon demonstrates that there are a number of factors relevant to an application such as this. For instance:
(a)whether there will a substantial delay caused by the amendment;
(b) the extent of any wasted costs;
(c)whether there is an irreparable element of unfair prejudice caused by the amendment;
(d)concerns of case management arising from the stage of the proceedings when the amendment is sought;
(e)whether the grant of the amendment will lessen public confidence in the judicial system; and
(f)whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.
It is, however, to be remembered that the primary question still remains: What do the interests of justice dictate? Aon reminds us that the prism through which these interests are viewed is wider than just that of the moving party.[45]
[45]Ibid at [12].
I have already addressed the case management considerations which are enlivened by Bega’s conduct. I shall now address the issue of whether a satisfactory explanation has been given for the late service of the expert reports. Bega’s application for leave to file the reports is supported by three affidavits sworn by Janet Mary Vivienne Whiting. In an affidavit sworn on 6 February 2020, Ms Whiting deposes:
[o]n 8 August 2019, G+T served on ABL a copy of the expert report of Dr Honeywill dated 8 August 2019. In accordance with the September Orders, any expert reports in reply were due on 25 October 2019. As referred to at paragraph 8(d)(v) above, it was not until after this date on 6 November 2019 that ABL served on G+T a copy of the expert report of Professor O’Sullvan in reply to Dr Honeywill’s expert report dated 8 August 2019 (O’Sullivan 6 November report). At paragraphs 247 to 265 of the O’Sullivan 6 November report, Professor O’Sullivan criticises Dr Honeywill’s opinions, which relied on the Provenance and Brand Survey by Harvest Insights in relation to consumer perceptions as the provenance of Bega branded cheese products.
On 20 November 2019 at trial, his Honour McDonald J raised the following queries in respect of consumer market research:
(a)‘[w]as there any market research evidence? I see there’s lots of expert evidence in this case so I’ll be looking very closely at the question of weight, but I would have thought, Dr Button, if you want to sustain a finding of fact from the Court, that the brand has been eroded, you would have market research, you’d interview 1,000 people and you’d ask them the question. Like, one person getting in the witness box and hypothesising about these matters, well I’ll look at that very carefully.” (T 298.26-299.4); and
(b)‘[i]s there going to be any evidence in the case – in respect of this implied representation claim – is there going to be any evidence of anyone actually having been misled or any market research evidence of that nature.’(T 260.20-23). (original emphasis)
At paragraphs 19 to 45 of the O’Sullivan 6 November report, Professor O’Sullivan criticises Dr Honeywill’s statements regarding the role and elements of brand strength, brand value and brand equity and how these brand elements relate.
Having reviewed these paragraphs of the O’Sullivan 6 November report, I considered it prudent to obtain further expert evidence in relation to brand equity.
On 4 December 2019, G+T instructed Mr Toby Ralph, a brand expert, to consider the effect of the plaintiffs’ marketing strategy on Bega’s brand equity and its position within the market to date, including the potential impact of the strategy into the future.[46]
[46]Affidavit of Janet Mary Vivienne Whiting sworn 6 February 2020 at [12]-[14] and [19]-[21].
Ms Whiting proffers no explanation for Bega’s failure to have made an application to rely on the expert reports of Messrs Bardsley and Ralph in accordance with s 65G of the Civil Procedure Act. Her affidavit is also silent as to why Bega proceeded to engage Messrs Bardsley and Ralph without providing any notice to the Court or Fonterra of its intention to do so. Ms Whiting deposes that she considered it ‘prudent’ to obtain further market research evidence in light of comments which I made during the parties’ opening submissions during the week commencing 18 November 2019, to obtain further market research evidence in relation to consumers’ perceptions as to the provenance of Bega branded cheese products.
I do not accept that the exchanges between myself and Dr Button QC and Mr Dalton QC provide any justification for Bega to be granted leave to file the Bardsley report. The exchange recorded at transcript T298.26 to T299.4 had nothing to do with Bega’s contention that Fonterra has breached cl 7.3 of the TMLA by engaging in misleading or deceptive conduct regarding the provenance of Bega cheese. Rather, it related to the nature of the evidence to be advanced by Bega in respect of the alleged contravention of cls 6.1 and 6.3 by reason of Fonterra’s marketing and promotion of Bega branded products having eroded the Bega brand.
As to my enquiry as to whether there would be any evidence led by Bega of anyone actually having been misled. This observation, which was directed to Mr Dalton QC, is the type of question regularly asked of counsel by a judge during opening submissions. The question provides no justification for Bega to be granted leave to rely upon the Bardsley report.
Ms Whiting’s explanation for the filing of the Ralph report is based upon criticisms at [19] to [45] in Professor O’Sullivan’s 6 November 2019 report (filed on behalf of Fonterra), of evidence contained in Dr Honeywill’s report of 8 August 2019 (filed on behalf of Bega) regarding the role and elements of brand strength, brand value and brand equity. Professor O’Sullivan’s report was by way of reply to Dr Honeywill’s report. No provision was made in pre-trial directions for Bega to have a right to file a further report in reply to Professor O’Sullivan’s report.
Effectively, Bega has sought, via the Ralph report, to file evidence in reply to evidence of Professor O’Sullivan replying to the evidence of Dr Honeywill. Bega has sought via the Bardsley report to address criticism in Professor O’Sullivan’s report of the Harvest Insights report.[47] Doubtless, Ms Whiting considered it prudent that Bega ‘have the last word’ by filing the Ralph and Bardsley reports. However, the filing of the reports begs the obvious question: when does the tit-for-tat filing of evidence come to an end? If Bega is granted leave to file the Ralph and Bardsley reports, Fonterra would be entitled to seek to file further evidence. The filing of the Ralph and Bardsley reports followed by further evidence in reply is inconsistent with the efficient, timely and cost effective resolution of the current litigation.
[47]BEG.009.009.0438.
It is not unusual for expert witnesses to disagree with each other. Bega and Fonterra will have ample opportunity to cross-examine the opposing parties’ expert witnesses. I do not accept that any prejudice sustained by Bega by not being given leave to file the Ralph and Bardsley reports is of such weight as to warrant leave being granted.
In facilitating the just resolution of the real issues in dispute, the Court must have regard, not only to the interests of the parties to this litigation, but also the potential adverse impact on other litigants who are waiting to have their cases heard and determined.
The proceeding was originally set down for trial in February 2019 on an estimate of 25 to 30 days of hearing. At a directions hearing before me on 6 September 2019 that estimate was revised to 30 to 35 days of hearing. As at 20 February 2020 there have been 21 days of hearing. The estimate of 35 days is certain to be exceeded. Putting to one side Messrs Ralph and Bardsley, there are still 16 witnesses to give evidence. In light of the fact that opening submissions lasted five days, final submissions are likely to be of equal, and probably greater, duration.
If Bega is granted leave to file the reports of Messrs Ralph and Bardsley, this would be likely to add approximately three to four days to the duration of what is already a lengthy trial. Mr Dalton submitted that if leave was granted to Bega to file the reports of Messrs Bardsley and Ralph, the lawyers acting for Fonterra would require three to four days to properly consider the material filed by Messrs Bardsley and Ralph and to assist in the preparation of answering material. This estimate seems reasonable. In order to avoid prejudice to Fonterra, if I had granted leave to Bega to file the Bardsley and Ralph reports I would also have adjourned proceedings for three to four days to permit Fonterra’s lawyers an opportunity to undertake work in relation to preparation of answering material. As such, if leave had been granted to Bega to file the Bardsley and Ralph reports the actual delay to the proceedings would be approximate six to eight hearing days. Accordingly, absent the evidence of Messrs Bardsley and Ralph, I estimate that this trial will conclude six to eight days earlier than would otherwise have been the case. These are days which can be allocated to the task of writing the judgment arising from the proceedings and/or hearing the claims of other litigants who are waiting to have their claims heard in the Commercial Court of the Supreme Court of Victoria.
In Aon, the High Court stated:
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to the parties having a sufficient opportunity to identify the issues they seek to agitate.[48]
[48](2009) 239 CLR 175, 217 [111]-[112].
This reasoning applies with equal force to the evidence to be led by the parties in the present litigation. Bega has an extremely well resourced legal team comprising two silks, two juniors and a number of instructing solicitors. Bega had choices as to what claims they made in their counterclaim and how they were framed. So too, they had choices as to the evidence to be led in respect of those claims. The claims alleging a breach of cls 6.1 and 6.3 (in support of which the Ralph report is sought to be relied), was first pleaded on 23 March 2018. The claim alleging a breach of cl 7.3 (in support of which the Bardsley report is sought to be relied) was first pleaded on 8 April 2019. Bega and its legal advisors have had more than a sufficient opportunity to prepare evidence in respect of the issues which they wish to agitate. Insofar as Bega points to the evidence in Professor O’Sullivan’s report of 6 November 2019 as giving rise to a need to lead further evidence, Bega will have ample opportunity to cross-examine Professor O’Sullivan regarding his criticisms of Dr Honeywill’s expert report.
Bega’s application for leave to file the Bardsley and Ralph reports is refused. I shall provide the parties with an opportunity to make submissions on the costs of the application heard on 17 February 2020.
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