Kraft Foods Group Brands LLC v Bega Cheese Limited (No 5)
[2018] FCA 1056
•13 July 2018
FEDERAL COURT OF AUSTRALIA
Kraft Foods Group Brands LLC v Bega Cheese Limited (No 5) [2018] FCA 1056
File number(s): VID 1220 of 2017 Judge(s): O'CALLAGHAN J Date of judgment: 13 July 2018 Catchwords: DISCOVERY – where respondent resists application for discovery of numerous documents – whether documents are relevant to issues in dispute – where some categories request extrinsic material relating to contracts – where some categories only tangentially related to issues in dispute Cases cited: Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 Date of hearing: 6 July 2018 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 30 Counsel for the Applicants: Mr R M Garratt QC and Mr I P Horak Solicitor for the Applicants: Spruson & Ferguson Lawyers Counsel for the Respondent: Mr A McGrath SC and Mr C H Smith Solicitor for the Respondent: Addisons Lawyers ORDERS
VID 1220 of 2018 BETWEEN: KRAFT FOODS GROUP BRANDS LLC
First ApplicantH.J. HEINZ COMPANY AUSTRALIA LIMITED
Second ApplicantAND: BEGA CHEESE LIMITED
Respondent
JUDGE:
O'CALLAGHAN J
DATE OF ORDER:
13 JULY 2018
THE COURT ORDERS THAT:
1.The applicants’ application that the respondent discover the documents described in the categories of documents numbered [1]-[9], [10](a) and [12] is refused.
2.The parties have leave to make any additional submissions they may wish to make about whether further discovery by the respondent is warranted on the question of whether, as the Second Further Amended Statement of Claim alleges, “the Mondelez Parties entered into the Sale and Purchase Agreement as agents for Intercontinental [Great Brands LLC]; alternatively, both in their own capacities and as agents for Intercontinental [Great Brands LLC]”.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’CALLAGHAN J:
Kraft Foods Group Brands LLC and H.J. Heinz Company Australia Limited (Kraft), the applicants in this proceeding, seek discovery from the respondent/cross-claimant, Bega Cheese Limited (Bega) of certain categories of documents in respect of this proceeding, the trial of which will commence on 6 August 2018.
The categories use the following defined terms:
Second Further Amended Statement of Claim means the Second Further Amended Statement of Claim dated 20 June 2018.
Defence means the Defence to the Second Further Amended Statement of Claim dated 29 June 2018.
Impugned Bega Packaging means the packaging illustrates at paragraph 74 of the Second Further Amended Statement of Claim.
Bega Advertisements means the advertising referred to at paragraph 39 of the Second Further Amended Statement of Claim.
Kraft Peanut Butter means peanut butter bearing a trade mark which contains or comprises the word "KRAFT".
Peanut Butter Trade Dress has the meaning given in the Second Further Amended Statement of Claim.
Mondelez Parties means the parties (other than Bega) to the Sale and Purchase Agreement referred to in paragraph 107 of the Defence.
The categories are:
Impugned Bega Packaging
(1)All documents which record or evidence the decision making process whereby Bega decided to sell or offer for sale peanut butter in the Impugned Bega Packaging.
(2)Any marketing plans for the sale of peanut butter in the Impugned Bega Packaging.
(3)Instructions to any person for the creation of the label which is presented on the Impugned Bega Packaging.
(4)Any document recording or evidencing the brand transition plans for peanut butter away from Kraft Peanut Butter.
Bega Advertisements
(5)All documents which record or evidence the decision making process whereby Bega decided to publish or cause to be published the Bega Advertisements.
(6)Any marketing plan pursuant to which Bega published or cause to be published the Bega Advertisements.
(7)All documents which record or evidence the instructions given by Bega to any advertising agency or other such third party to create the Bega Advertisements.
(8)Copy of the “Brand Books”, “trade mark usage style guide” or similar document (however titled) of Kraft Foods Ltd, describing or illustrating the key brand elements of the packaging of Kraft Peanut Butter, for the years 2009 to 2012.
(9)Copy of any trade mark usage style guide or brand book or similar document provided to Bega in the course of its acquisition of the business referred to in paragraph 107 of the Defence which describes or illustrates the key brand elements of the packaging of Kraft Peanut Butter, for the years 2013 to 2017.
Sale and Purchase Agreement
(10)Any document recording or evidencing:
(a)statements or representations made to Bega by or on behalf of the Mondelez Parties prior to 4 July 2017 in relation to the rights or obligations of the Mondelez Parties, Intercontinental Great Brands LLC or Kraft concerning the Peanut Butter Trade Dress;
(b)the acquisition by Bega of a transitional royalty free trademark licence for the KRAFT mark, including in relation to peanut butter and processed cheese until December 2017 as referred to in the document cross-referenced in paragraph 26 of the Second Further Amended Statement of Claim; and/or
(c)the acquisition by Bega of the rights to the Kraft brand until the end of 2017 as referred to in the document cross-referenced in paragraph 32 of the Second Further Amended Statement of Claim.
(11)A copy of the Disclosure Letter (and any documents attached to the Disclosure Letter) as referred to in clause 8.4 of the Sale and Purchase Agreement between the Mondelez Parties and Bega Cheese Limited dated 19 January 2017.
(12)A copy of any trade mark agreement between Kraft Foods Ltd (as it was previously named) and any person which governed the use, promotion and sale of peanut butter products as referred to in paragraph 100(c) of the Defence, including any trade mark licence agreement between Kraft Foods Ltd and Kraft Foods Global Brands LLC, prior to October 2012.
(13)A copy of any document under which Mondelez Australia (Foods) Ltd was permitted to promote and sell peanut butter under the Registered Kraft Trade Marks, as referred to in paragraph 104 of the Defence, during the period October 2012 - June 2017.
Bega has agreed to provide the agreements effecting the acquisitions referred to in [10](b) and [10](c), and I do not understand there to be any outstanding controversy about those two categories, or category [12], which has been, or will be, discovered.
The parties have otherwise been unable to reach agreement on the requests.
Bega complains that many of the requests are made too late in the piece and that they are in any event either too widely cast and/or irrelevant to any pleaded issue.
Taking each in turn:
Categories [1]-[7]
As to categories [1] to [7], Bega’s counsel submit that these categories go to the intention behind Bega publishing “comparative” advertising that featured statements such as “Kraft Peanut Butter is now Bega” (categories [5]-[7]) as well as the intention behind its adoption of trade dress which is similar in appearance to that used in respect of Kraft Peanut Butter (categories [1]-[4]).
Counsel for Kraft contends that “the subjective intention of Bega to deceive or misrepresent is not a required element to establish passing off or contravention of the misleading or deceptive conduct provisions. Nevertheless, proof of deliberate borrowing of the features or get-up of a rival's product is a relevant matter, for, if trade indicia are adopted for the purpose of appropriating part of the trade or reputation of a rival, it may be presumed to be effective for that purpose and therefore likely to deceive or confuse”, citing the well-known passage from the judgment of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 at 657:
...The rule that if a mark or get-up for goods is adopted for the purpose of appropriating part of the trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or confuse, no doubt, is as just in principle as it is wholesome in tendency. In a question how possible or prospective buyers will be impressed by a given picture, word or appearance, the instinct and judgment of traders is not to be lightly rejected, and when a dishonest trader fashions an implement or weapon for the purpose of misleading potential customers he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive...
Counsel for Kraft submits that “[t]he statements made by Bega such as “Kraft peanut butter is now Bega peanut butter” are said by Bega not to convey the representation that the Kraft brand is ending but, instead, convey an alternative representation about a change in product. This latter representation does not foreclose the former being made. There is a live issue as to the representations which were conveyed. Bega’s disclosed intentions and conduct in commissioning the advertising are relevant evidence, from persons expert in the field, as to the representations conveyed to consumers by their advertising. The judgment of traders (such as Bega) in implementing their advertising campaign is a relevant evidentiary matter and is not lightly rejected”.
It is further submitted on behalf of Kraft that “[h]ow and why Bega chose the labelling and colour of the Impugned Bega Product is relevant for the same reasons. Bega was well aware of previous sales of Kraft Peanut Butter in similar packaging. The documents sought in categories [1]-[4] go to this intention and whether, as Kraft will contend, the packaging was chosen to (and does) draw an association with Kraft Peanut Butter and is therefore misleading and deceptive or likely to be so”.
Counsel for Bega submits that categories [1] through [7] “can be grouped together in summary fashion as documents going to Bega’s intention. Our case in relation to the discovery of those documents is that there is no pleaded case that concerns Bega’s intention, and accordingly, categories [1] to [7] are truly irrelevant to the case that has been brought by Kraft”.
As for Kraft’s reliance on the passage from Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641, counsel for Bega relies upon another part of the paragraph in the joint judgment to make his point about the irrelevance of the material sought (Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 at 657):
… But the practical application of the principle may sometimes be attended with difficulty. In the present case it has caused a prolonged and expensive inquiry into the states of mind, motives and intentions of three people whose combined judgment decided that the company should adopt the trade brand and description complained of. This in turn necessitated an investigation of the steps by which the picture was obtained, considered and adopted and what was said and done by a number of persons in relation to the subject. From all this material, it appears to us that no more emerges than that though the name and mark Caesar were not sought or taken with any fraudulent intent, yet three or four people conversant with the matter saw in them too great a resemblance to those of the appellant, that their views were disregarded by the respondent, who may have thought they were erroneous, or may have thought that such a resemblance, if it existed, only added to the suitability of the mark. Incidentally the issue of intention provided an occasion for the disclosure in the witness box of much want of candour on the respondent's side. But, in the end, it becomes a question of fact for the court to decide whether in fact there is such a reasonable probability of deception or confusion that the use of the new mark and title should be restrained.
Counsel for Bega further submitted:
Now, quite clearly whatever is the documents that might go to intention, they can’t be decisive because at the end of the day, it’s for your Honour to determine as a question of fact whether the relevant representation was made or whether the conduct was likely to lead consumers into error. And the facts of the present case don’t support the discovery that’s sought because neither party is seeking to surreptitiously copy the appearance of the other’s property or develop a product that otherwise sails in any way close to the wind.
Either party has been quite up front as to their intentions in using the getup. One party – one company considers that it has got the right to do so because it has acquired the underlying good will that’s referable to the getup. And Kraft had pleaded very specific representations which, your Honour, are not very far from what we say was represented. So this is a case that involves quite fine distinctions, and it’s inherently unlikely that there would be any statement from someone at Bega that they sought to adopt something that they knew to be untrue. And the intention of the parties here is clear on both sides.
Counsel for Bega also made a further submission about categories [1]-[4], as follows:
Dealing with them separately, categories [1] to [4], if your Honour is of the view that evidence of Bega’s intention is to be – is relevant and should be assessed, then it could only be its intention to use the Bega trademark on the packaging, first with the Good Nut trademark and then the Bega trademark itself, because, as is pleaded, the rest of the packaging was already in use at the time that Bega bought the business from Mondelez. Bega did not choose to adopt the trade dress in its packaging. Bega merely continued to use the packaging designs which were then in existence, and then it applied the Bega trademark to those already existing designs. And on that basis, to the extent that any documents are considered to be relevant, then they should be limited to those documents relating to any decisions, plans, and instructions to apply the Bega trademark to the already existing label.
I am not persuaded that the discovery of the documents described in categories [1]-[7] is necessary. That is because it is no part of Kraft’s pleaded case (either in respect of the so-called “impugned packaging” or the advertisements) that Bega intended to deceive. Intention to mislead or confuse is not a necessary element of any of the claims Kraft makes against Bega. As the passage from the judgment in Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 at 657 relied upon by Bega illustrates, the practical application of the principle sought to be invoked by Kraft here may be attendant with all sorts of difficulties, culminating in lengthy trials about issues of whether a party intended to deceive, confuse or mislead, which ultimately prove not much at all, and which may therefore have no relevance to the question of fact whether there a reasonable probability of relevant deception, confusion or misleading.
In any event, as I say, Kraft has not pleaded relevant intention and I fail to see how, in such circumstances, any of the documents in categories [1]-[7] are relevant.
It is unnecessary therefore to deal with Bega’s alternative submission on categories [1]-[4].
Categories [8]-[9]
These “books” and “guides” are, Kraft submits, “documents kept by the users of a trade mark which show the way the mark is meant to be presented uniformly on the product. Guidelines showing how the trade mark is meant to be used show control over the use of the trade indicia and the importance of the indicia, and provide useful evidence as to how the packaging of a product is presented in the market place”. They are said, therefore, to be relevant to the issues in dispute on the advertisement claims.
Counsel for Bega submitted, on the contrary, that:
These are brand books and style guides, and it’s said to be that there’s an assertive relevance that they might record some internal perception as to what parts of the label are important for communicating. But there’s no equivalent Australian Woollen Mills type authority that applies to these types of categories. Instead, what might be eye-catching or noticeable to a consumer is assessed – is to be assessed by reference to the packaging, itself. And, further, we would say that any such documents would relate, again, to what Bega’s predecessor, being Mondelez Australia, had, as their views, not what Bega’s views were. There’s no conflict in the evidence between the parties as to the way in which the products have been displayed.
It will be a matter for your Honour to determine, objectively, the impression to which they give rise. Having the documents that might fall within these categories would not assist with the task.
I agree with Bega’s submission and I do not propose to order discovery of the category [8]-[9] documents.
Category [10] - Sale & Purchase of Business by Bega
In their written submissions, counsel for Kraft submitted that “Category 10 is directed to contemporary documents which may elucidate the rights that Bega claims to have purchased from Mondelez at the particular time and, in particular, whether Bega had purchased goodwill in respect of the peanut butter trade dress. The documents are also relevant to whether Bega acquired a licence to use the Kraft mark and the terms of any such licence. The documents also go to the issue of intention and whether Bega believed that it had acquired the right to utilise the Peanut Butter Trade Dress. Bega alleges it bought a business which included goodwill in trade dress. It has agreed to provide a limited class of documents however this class is so limited it would not go beyond the present sale and purchase agreement already provided. The documents sought would assist the Court in understanding what was purchased and the commonly agreed facts upon which the parties transacted”.
In oral submissions, counsel for Kraft further explained that part of the reason that Kraft sought the category [10] documents was that it had not yet been provided by Bega with a final, executed copy of the Sale and Purchase Agreement. Counsel for Bega said that was because Kraft had never asked for it. The upshot of it was that Bega said it would discover that document, which I assume has now been done.
But Kraft still pressed category [10] for this reason:
Your Honour, the matter isn’t quite as simple as my learned friend would have it. What we’ve got, your Honour, as I was indicating earlier on, was a sale and purchase agreement which isn’t in – that we have seen at least, in final executed form, to which there are three Mondelez parties named as vendors. But in respect of the transactions involved in therein, Intercontinental Great Brands is a participant. Your Honour, just what the final agreement was at this point is not entirely clear. What was also not clear is the agency issues concerning whether the Mondelez companies were – the three-named Mondelez companies were acting also for Intercontinental Great Brands. Which we would say, your Honour ought infer, but may well be addressed in this correspondence as to what the agreement was achieving. Namely, the transfer to Bega of the Australian Kraft peanut butter business which would have necessarily involved, we would say, Intercontinental Great Brands.
…
Now, it may exist. If it does it should be provided. But even if it does exist, your Honour, you would still – we would still be interested to see companion letters which explained what was being achieved in terms of, for example, the transfer of rights with respect to the peanut butter licence, so that it – the agency argument, for example, would be advanced by such correspondence that shows that what is being transferred, in effect, is the full benefit of the peanut butter licence that ---
HIS HONOUR: How does that – unless a letter constitutes a side agreement, how would a letter evincing someone’s understanding of what the agreement achieved be relevant to the court’s determination about what the agreement, in fact – transfers?
MR GARRATT: The – in this respect, your Honour, the sale and purchase agreement has its vendors three Mondelez companies, not Intercontinental Great Brands. In the schedules – in one of the schedules in particular there’s a definition of what are the transferred IP rights. And articulated there is this very peanut butter licence. It’s a valuable piece of property. It’s not surprising that it’s set out there. What is clear in point of careful legal analysis is that none of the three vendors, it would be argued, had the title to pass that licence. And, therefore, if, however, that was what was intended by the agreement, in other words, that that licence was to be passed, then it could only be because the vendors were acting as agent for Intercontinental Great Brands. So the correspondence might confirm the existence of the authority which might otherwise, in any event, be inferred. We’re not saying, your Honour, that the correspondence would contradict the proper reading of the agreement. It would simply better inform the authority of the vendors in relation to the transaction.
HIS HONOUR: Sounds a bit speculative to me, but …
MR GARRATT: That’s how it’s put, your Honour.
A little later, Kraft’s counsel came back to category [10] and made further submissions, which are again best recorded by reciting the relevant part of the transcript:
…As to [10], your Honour, I’m grateful for my learned friend saying we’re going to have the executed agreement. But it still won’t overcome the authority questions, assuming the agreement is in the form that we’ve seen it. Namely…
HIS HONOUR: Where do I find the authority questions in the pleadings?
MR GARRATT: There’s a plea of agency, your Honour. The second further amended statement of claim.
HIS HONOUR: I have that.
MR GARRATT: Paragraph 31 is A, B, C and D, your Honour. And the response to those paragraphs is that they’re all denied.
..
MR GARRATT: … Mondelez parties entered into the sale and purchase agreement of agents for Intercontinental. Alternatively, both in their own capacities and as agents for – and these things are denied. So companion correspondence should well shed light on that issue. As I say, your Honour, it’s not going – it’s not being adduced to contradict what is otherwise the proper interpretation of the agreement. It’s simply to identify that the vendors were authorised, in effect, to deal with the peanut butter licence under clause 3.1 …
HIS HONOUR: What’s the forensic significance of the plea that the Mondelez parties entered into the agreement as agents of Intercontinental? Why does it matter?
MR GARRATT: The significance, your Honour, is that the sale and purchase agreement contains – and I can take your Honour to the – as part of it – that contains a description of the licences intended to be sold as including this peanut butter licence. But the ownership of that peanut butter licence was not in the name of any of the three vendors but Intercontinental Great Brands. So on the face of it, it’s open for an argument to be run, well, there was no assignment of the peanut butter licence because none of the three vendors could have disposed of it, because they weren’t the owner. Whereas another company in our group they would say was the owner, but it didn’t dispose of it, even though it’s party to the transaction, as your Honour has seen earlier, even though it is receiving substantial payment under the sale and purchase agreement in respect of transferred IP licences. And we say, your Honour, when your Honour sees the whole picture your Honour ought infer that the vendors must have been authorised to do it. But if we can take the matter beyond inference by – because some correspondence makes it absolutely plain what’s being sold, then the question of authority becomes all that much clearer.
(Emphasis added)
Counsel for Bega responded:
MR McGRATH: The matter can be simply dealt with, your Honour, by the production of the agreements. The idea that [10](a) – that any document recording or evidencing statements made by Bega, representations made by Bega prior to 4 July, we would have to hunt through the entire
HIS HONOUR: That’s why I said to Mr Garratt that the categories don’t seem to be defined to hit the target of this agency point.
MR McGRATH: But they’re not, and the reason – and it’s very unsatisfactory for the applicant to come to this Court at this stage without any proper explanation as to why each one of these categories is relevant to the issues that are pleaded. I mean, we were completely left in the dark about that matter until the – it was precisely formulated in the submissions today. Mr Garratt is making a lot of very, very simple points. They already have an agreement which was produced by Mondelez that is attached to Mr Garratt’s affidavit.
And we’re offering to provide them two other documents, and the idea that all this other materials is just somehow relevant to the case that’s pleaded seems to be just creative of an enormous amount of work for very, very little. I mean, we’ve put our case very clearly. We’ve said exactly why it is that we think we’re entitled to use the packaging, and it’s because of our acquisition of the business and its attendant goodwill. And the idea that there is some other representation or statement in some other document that we should be required to search for to assist them to prove their case just seems to be completely over the top compared to the – its tangential relevance.
In the light of these exchanges, and what seems to me to be an important issue that arose out of oral argument, which was not to me, at least, apparent from the broad description of the category [10] request, I propose to ask the parties after the publication of these reasons whether further discovery by Bega of a more limited nature is warranted on the question whether, as the Second Further Amended Statement of Claim alleges at multiple paragraphs (including, for example, [31A](a)), “the Mondelez Parties entered into the Sale and Purchase Agreement as agents for Intercontinental [Great Brands LLC]; alternatively, both in their own capacities and as agents for Intercontinental [Great Brands LLC]”.
Category [12] and [13] - Licence Agreements
Category [13] need not be considered now, because Mondelez has provided the document.
Counsel for Kraft submitted that “[t]hese categories go to the plea by Bega that it has the benefit of any goodwill which had accrued to Kraft Foods Ltd. Goodwill did not inure to Kraft Foods Ltd where the use was under the licence from another party which gave control and ownership of generated goodwill to that other party. Mondelez Australia (Foods) Limited have already provided some agreements. This category goes to any remaining agreements that might be in the possession of Bega as a result of its acquisition of that business. It was suggested by Counsel for the Mondelez parties on the 20 June that such documents would likely have gone over to Bega during the purchase of business. Bega agree category [13] but not category [12]”.
Counsel for Bega had a raft of objections to Category [12], as follows:
Turning finally to category 12, this is said to be relevant to whether Kraft Foods Global Brands, which is the SnackCo IPCo in the master trademark agreement, was the beneficial owner of the trademarks that are registered in Kraft Foods Limited’s name. This is a matter that is for Kraft to prove. It’s seeking licence agreements which were in existence prior to October 2012, which your Honour will have seen is the pre-restructure date. Now, this involves nothing more than fishing on the part of Kraft and, further, no legal basis has been identified that would give rise to the position that’s asserted. And, in short, your Honour, they can’t be relevant to any question that is in issue under the pleaded case. That’s the position of Bega with respect to those documents.
It is sufficient to say that I accept those submissions, and I will not make an order for production of the category [12] document(s).
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan. Associate:
Dated: 13 July 2018
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