Reebok v SOCOG
[2000] NSWSC 1014
•2 November 2000
CITATION: Reebok v SOCOG [2000] NSWSC 1014 CURRENT JURISDICTION: Equity Division
Commercial ListFILE NUMBER(S): SC 50149/99 HEARING DATE(S): 30.10.00 JUDGMENT DATE: 2 November 2000 PARTIES :
Reebok International Limited -v- Sydney Organising Committee for the Olympic GamesJUDGMENT OF: Hunter J
COUNSEL : Plaintiff: F M Douglas QC & C A Moore
Defendant: S J Gageler SCSOLICITORS: Plaintiff: Freehills Solicitors
Defendant: Blake Dawson WaldronCATCHWORDS: Practice and Procedure - costs - interlocutory proceedings derived by consent orders after extensive history CASES CITED: Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia : Ex Parte Lai Qin (1997) 186 CLR 622
One.Tel Ltd -v- Deputy Commissioner of Taxation (2000) 171 ALR 227DECISION: Costs of the applications plaintiff's costs in the cause.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LISTHUNTER J
THURSDAY 2 NOVEMBER 2000
50149/99 REEBOK INTERNATIONAL LTD -v- SYDNEY ORGANISING COMMITTEE FOR THE OLYMPIC GAMES
REASONS FOR JUDGMENT
1 The remaining issue between the parties is that of the costs of several interlocutory disputes which were resolved without a full hearing on the merits. At the centre of those interlocutory disputes was the endeavour of the defendant (SOCOG) to protect the confidentiality of discoverable documents.
2 Issues of that kind had arisen before Rolfe J in motions by SOCOG on notices dated 3 March and 5 April 2000. The nature of the substantive issues in these proceedings and of those interlocutory questions are set out in His Honour’s judgment of 12 April 2000. The nature and history of those interlocutory disputes is not, in my opinion, without relevance to the present dispute about costs.
3 In brief, the plaintiff (Reebok), seeks damages from SOCOG for an alleged breach of a marketing agreement between them of 11 November 1997 (the Reebok agreement). The breach is said to be constituted by SOCOG’s granting of Olympic Games related marketing rights to competitors of Reebok under agreements referred to as the Canterbury agreement and the Dunlop agreement (Reebok referred in its summons to the Dunlop agreement as the Bond arrangement - however nothing turns on that).
4 SOCOG in its defence admitted to having entered into the Canterbury and Dunlop agreements, while denying any breach of the Reebok agreement. In turn, SOCOG, by way of cross claim, seeks damages from Reebok for breach of the Reebok agreement, the breach relied upon being Reebok’s purported termination of the Reebok agreement for SOCOG’s alleged breach.
5 By its notice of motion of 5 April 2000 SOCOG moved for orders limiting inspection of the Canterbury and Dunlop agreements in redacted form to legal representatives of Reebok, subject to undertakings as to confidentiality. The hearing before Rolfe J proceeded only in relation to the Dunlop agreement, the parties having resolved their differences in respect of the Canterbury agreement.
6 The issue before Rolfe J was described in His Honour’s judgment as being “whether two employees of Reebok, namely Mr David Pace and Mrs Stephanie Cucurullo, both of whom are in-house lawyers of Reebok, should have access to an unedited version of the … Dunlop agreement, subject to their furnishing confidentiality undertakings” (par 13 of the Rolfe J judgment).
7 The competing contentions of the parties before Rolfe J came down to a submission on behalf of SOCOG that the “confined issue” in relation to the Dunlop agreement made it “unnecessary” for wider access being given to the agreement than that contended for in its motion. It was Reebok’s submission that “proper instructions” could not be obtained without disclosing its contents to employees of Reebok.
8 The confidentiality argument was based on SOCOG’s evidence that the Dunlop agreement contained “significant commercially sensitive information”, knowledge of which would give Reebok “a head start and competitive edge over … Dunlop or other potential sponsors tendering for and negotiating sponsorships in relation to future Olympic Games” (par 32 of the judgment of Rolfe J). It was SOCOG’s position that once that information was obtained by Reebok’s employees they “could not remove from their minds what they had learned” (para 25). That market advantage was said to be one that enabled Reebok to engage in “ambush marketing”, namely, a market strategy devised with knowledge of a competitor’s marketing arrangements.
9 Rolfe J considered that SOCOG’s evidence on this question of ambush marketing had been “eroded to a not insubstantial extent” by cross examination. Reebok’s contention of undue hindrance in the preparation of its case was supported by expert evidence of its external solicitors on the record.
10 In the result, Rolfe J ordered disclosure of the Dunlop agreement to Reebok’s in-house lawyers in redacted form as particularised in the judgment (par 44).
11 On 19 July 2000 the Court of Appeal in a unanimous judgment dismissed SOCOG’s appeal from that decision. In the period between the two judgments the issue of discoverability of documents was enlivened during the course of a directions hearing on 28 April 2000. On that occasion the parties agreed upon categories for discovery, save for the following:
“ Category 2
…documents … recording:
(a) the negotiation of the Canterbury Agreement …
…
Category 4
…
….
(b) All dealings between SOCOG & Nike between 1 September 1999 and 31 December 1999.
Category 6
All documents which relate to or detail the value of a sponsorship deal in relation to the Sydney 2000 Olympic Games whereby the grant of exclusive marketing rights is given in relation to specific products.”
12 I declined to direct discovery of Category 6 documents in that form and directed discovery of the other disputed categories.
13 Category 4(b) documents were relevant to issues raised by SOCOG’s cross claim for damages, it having entered into marketing agreements with Nike relating to the Sydney Games.
14 The issue of confidentiality was revived by Reebok’s notice of motion of 7 June 2000 returnable for 16 June 2000. By that motion Reebok sought extension of access to the Canterbury agreement by certain staff members of Reebok and of its solicitor on the record and to “such witnesses or prospective witnesses as are necessary for the proper conduct of [the] proceedings”. On 9 June 2000 I gave directions for the filing of affidavit evidence and for the exchange of submissions for the hearing of Reebok’s motion which was fixed for 30 June 2000.
15 On that date Reebok was granted leave to file in court, out of time, further affidavit evidence and an amended notice of motion which sought orders in relation to the Nike agreement (and another described as the Nike Licence) in terms similar to those sought in relation to the Canterbury agreement and a similar extension of access to the Dunlop agreement.
16 A substantial volume of affidavit evidence and documentary evidence was adduced during the course of hearing on 30 June 2000, during which Reebok’s legal expert witness was cross-examined on her opinion evidence of the need for an extended access to the subject agreements. It is no criticism of counsel to say that the cross examination did not result in any significant qualification of the witness’s opinion evidence in-chief. It was SOCOG’s position that the proffered undertaking as to confidentiality by persons associated with Reebok who were given access to the subject agreements was of little practical effect. The motion was adjourned part heard to 28 July 2000.
17 On the adjourned date the issues between the parties were expanded, with Reebok’s objection to the production of documents in answer to a notice to produce given by SOCOG, and by the objection of Reebok Australia Pty Ltd (Reebok Australia) to the production of similar documents on subpoena to it issued on the application of SOCOG. In each case the documents sought related to marketing plans for the Sydney Olympic Games in the period following mid December 1999. The production of the documents was required in aid of SOCOG’s contention that knowledge by Reebok’s employees of the contents of the subject agreements would lead to ambush marketing by Reebok.
18 The expanded dispute concerning the production of documents under compulsion of subpoena and notice to produce had been excited by a memorandum passing between Reebok’s related corporations in which ambush marketing was under consideration in relation to the Sydney Olympic Games.
19 As a consequence of these developments I gave directions for the filing of further evidence and the exchange of submissions relating to those expanded issues and adjourned the matters to the following week, namely on 3 August 2000.
20 On that date I granted leave to the parties to file in court further affidavits. By consent, a confidentiality order was made in respect of the transcript of evidence and the contents of certain affidavits read during the course of the hearing of 3 August 2000.
21 The matter was adjourned part heard to Friday 4 August 2000 when it was further adjourned to 7 August 2000. In the period of that weekend adjournment, the issue relating to the production of documents was narrowed, as appears from the following extracts of the transcript of proceedings of 7 August :22 With the dispute as to the production of documents out of the way, I advanced a broad proposal for the resolution of the confidentiality issues as follows:
“GAGELER : Your Honour can I tell you what has happened as a result of Mr Forbes’ affidavit a refinement of request for documents, it is now limited to an extremely narrow category of documents and they are basically documents surrounding the meeting of 10 May 2000. We were finally told about it on Friday. I can hand to your Honour correspondence that limits the request on subpoena and the same limitation has been made in respect of the notice to produce.
(Correspondence handed to his Honour.)
HIS HONOUR: I will not mark that at the moment. Is the Forbes material, Mr Douglas, still a live issue?
DOUGLAS: In the sense that --
HIS HONOUR: In the sense you object to the production of the documents and maintain that they really do not bear upon your application for an extended distribution of the documents.
DOUGLAS: That is our position. However, could I say this, that we have had an opportunity of looking at the letter which Mr Gageler has just handed up and provided we understand it as being a stand alone request, it is not qualified by words in the notice to produce or subpoena, namely original documents and copies and electronic documents which record or relate to. All they are asking for is agenda, hard copy of e-mails etc. prepared by or as a result of the meeting of 10 May.
I can say on Reebok’s behalf we have no such documents that have not been produced. Rather than insist upon my formal position I would go to the ultimate resolution of that.”
(T1: 24-58)
“HIS HONOUR: The reason I ask is this, it may disappoint you to hear I have not acquired a detailed knowledge of the evidence that has been tendered. I have gone through the submissions and particular memoranda and one or two of the affidavits I thought more important than others. The general view I have got is that there should be at some stage an extension of the people to whom disclosure of the agreement in either of its forms should be made.
It also seems to me though that a lot of the concern that SOCOG has in relation to confidentiality will be diminished once the month of September goes by. It would not be the end of the problem but to my way of thinking it would remove a great deal of things from the issue of confidentiality once the Olympics were over.
As matters presently stand I see no particular prejudice to either party in making orders along the lines I have indicated but not to take effect until some date in early October this year.”
(T2: 1-20)
23 Senior Counsel for Reebok agreed to that general regime. However, he sought to bring access to the Nike agreement into line with access as ordered by the Court in relation to the Dunlop agreement. I declined to accede to that application, preferring to defer extended access to the Canterbury and Dunlop agreements and access to the Nike agreement until the conclusion of the Sydney Games.
24 Counsel for SOCOG stated his client’s attitude to my proposal on the confidentiality question as follows:
“GAGELER: Your Honour on the basis that the best compromise is one that leaves both parties unhappy what Your Honour has proposed is difficult to resist. Can I say this about marketing agreements, all of them extend beyond the Olympics up to March 2001 but the sting is really in the Olympics. If your Honour were to contemplate orders roughly in the terms that have been articulated I would find it difficult to refuse.”
(T5: 42-49)
25 I reserved judgment in the matter, in effect, until 30 October 2000, on the basis that, if the parties reached agreement on the manner in which extended access should be granted, then the presentation of short minutes of order would obviate the need for a further Court attendance of the parties. Alternatively, if no agreement was reached, the parties were invited to submit competing short minutes of order for extended access, upon the receipt of which I would deliver judgment.
26 On 31 August 2000 the matter was listed to enable consent orders to be made granting extended access to the Dunlop and Canterbury agreements and access to the Nike agreement in like terms. The orders so made were comparatively extensive and detailed and, I think, reflected considerable attention to the question of confidentiality by both parties. The only question outstanding on the interlocutory matters was the question of costs. That was dealt with by way of written submissions on 30 October 2000 when I reserved my decision.
27 The competing submissions on costs treated the costs associated with the notice to produce, the subpoena and the amended notice of motion as discrete and separate issues. In reality they were not. While Reebok Australia was not a party to the principal proceedings, I think it is unrealistic to treat its costs in relation to the subpoena issue as separate from Reebok’s costs of the other issues.
28 In the first place the subject matter of the subpoena was clearly directed at the confidentiality issue. It would not have been practical to dispose of the confidentiality issue without first determining the issues raised by the objections of Reebok and Reebok Australia, to the production of documents, the contents of which were suspected by SOCOG to relate to ambush marketing plans by Reebok.
29 Further, the arguments against production of documents were substantially the same in the case of the two processes. It is unlikely that any costs, other than minimal costs would have been incurred by Reebok Australia beyond the costs incurred by Reebok in relation to the notice to produce. There has been no suggestion that any exercise was undertaken by Reebok Australia to collect any documents in answer to the subpoena and, in that context, I note that, when the issue was narrowed in relation to the production of documents, no documents beyond those which had been previously produced by Reebok were said to exist.
30 I further note that there was no formal application by Reebok Australia to set aside the subpoena, the argument against the production of documents being submitted on its behalf by the same legal representatives who appeared for Reebok. The documents required to be produced under the subpoena, for practical purposes, were the same as those the subject of the notice to produce.
31 In those circumstances I think there is no call to make an order as to costs on the subpoena. Rather I think it is more appropriate to treat those costs as replicated in Reebok’s costs on the notice to produce and, to the extent that that is not so, I regard those additional costs as likely to be inconsequential.
32 The basic position of the parties in the costs issue may be summarised as follows. On behalf of SOCOG it is contended that there be no order as to costs, or alternatively that costs be costs in the cause on the basis that the parties compromised their disputes and, in the absence of a concluded hearing on the merits, the appropriate approach in the exercise of the Court’s discretion is that expressed by McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia : Ex Parte Lai Qin (1997) 186 CLR 622 at 624 and 625, and by Burchett J in One.Tel Ltd v Deputy Commissioner of Taxation (2000) 171 ALR 227 at 231-233. There is no dispute as to the appropriateness of those considerations to the current dispute.
33 It is the contention of counsel for SOCOG that the upshot of the narrowing of the category of documents required to be produced by the Reebok corporations and the agreement on the deferred extended access to discovered documents in terms of the consent order of 31 August 2000, was that neither party was wholly successful.
34 Reebok’s central submission is that it could not have achieved an extended access to the subject agreements without bringing the amended notice of motion of 30 June 2000. I do not understand that contention to be dissented from by SOCOG. In any event, I think that is a fair description of the necessity for Reebok’s application.
35 Even so, I do not think it follows, when such proceedings are compromised, that the applicant, as a matter of course, should have the costs of the application.
36 In conformity with the approaches followed in Lai Qin and One.Tel, I think it is relevant to note that the compromise followed an extensive hearing and an indication from me as to the direction in which the interlocutory proceedings were heading on the confidentiality question. I think it is also relevant to observe that the compromise was one involving significant concessions by SOCOG in line with that indication from the Court.
37 In my view, those considerations go against the appropriateness of orders that each party pay their own respective costs, or that costs be costs in the cause. I think the choice comes down to orders, either that Reebok has its costs of the issues raised on the notice of motion and the notice to produce, or that the costs be the plaintiff’s costs in the cause. Of those two, I am of the view that the fairer result is achieved by an order that the costs of the notice to produce and the notice of motion be the plaintiff’s costs in the cause, and I so order.
38 In interlocutory disputes of this kind, I think the Court should give some recognition to the desirability and advantages of compromise and give some encouragement to the resolution of bona fide disputes by agreement between the parties, particularly should that be so, in my view, in significant commercial disputes, involving serious questions of confidentiality.
**************
0
3
0