Godfrey Hirst NZ Limited v Bremworth Limited
[2022] NZHC 1944
•8 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1509
[2022] NZHC 1944
BETWEEN GODFREY HIRST NZ LIMITED
Plaintiff
AND
BREMWORTH LIMITED
First Defendant
CAVALIER CORPORATION LIMITED
Second Defendant
Hearing: 22 July 2022 Appearances:
J Dixon QC and A Thomson for Plaintiff Y Dong and J Edwards for Defendants
Judgment:
8 August 2022
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
This judgment was delivered by me on 8 August 2022, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
[1] The defendant companies, Bremworth Ltd and Cavalier Corporation Ltd, which are members of the Bremworth group of companies and referred to collectively in this judgment as “Bremworth”, seek an order for further tailored discovery against the plaintiff company, Godfrey Hirst NZ Ltd (“Godfrey”). Bremworth and Godfrey
GODFREY HIRST NZ LIMITED v BREMWORTH LIMITED [2022] NZHC 1944 [8 August 2022]
are competitors. Their core businesses involve manufacturing carpeting. In this proceeding, Godfrey alleges that Bremworth has breached the Fair Trading Act 1986 by engaging in misleading and deceptive conduct in the course of an advertising campaign that compared the relative characteristics of woollen and synthetic carpeting. Initially, Godfrey sought a declaration to that effect, injunctive relief and damages. It has recently indicated that, because both parties have been trading in extraordinary circumstances, primarily as a result of the Covid pandemic, calculating its loss would be more than usually difficult, and that, for that reason, it will not be pursuing the claim for damages.
[2] The parties have already engaged in one round of tailored discovery, both having discovered documentation within agreed categories.
[3] Now Bremworth seeks further tailored discovery from Godfrey. The categories of additional documentation it seeks are set out in its interlocutory application dated 16 March 2022 in the following terms:
Godfrey Hirst marketing
5. Any documents that feature or featured any statements made, approved or endorsed by Godfrey Hirst as at or from 1 June 2019 to present, including whether such statements are still available to the carpet purchasing public in New Zealand, that:
(a)refer to the nature or characteristics of wool as a fibre or when used in the manufacture of carpet, including any references to the environmental characteristics or effects of wool or wool carpet;
(b)refer to the nature or characteristics of plastics or microplastics, including their effect on the environment or human health or when used in the manufacture of synthetic carpets;
(c)refer to Godfrey Hirst's carpet as "the most environmentally friendly carpet on the planet" or similar; or
(d)refer to the nature or characteristics of synthetic carpet, including any references to any health or environmental effects or sustainable attributes of any synthetic carpets or their components, (together, the "Godfrey Hirst Claims").
6. All advertisements published as at or from 1 June 2019 to present that feature any of the Godfrey Hirst Claims in the format in which consumers experienced them, including any personal, print, broadcast or online advertisements, messages or public statements, such as:
(a)direct or interactive marketing, for example, any letters, emails or messages on social media directed at the public or consumers within a database;
(b)sales promotions, for example, any messages that were part of tactics to encourage purchase such as discounts off the original price;
(c)personal selling, for example, any advertising material aimed at the sales force; and
(d)advertising messages that may be part of packaging, for example, any messages on carpets or on the packaging of carpets.
Relevant sources of the advertisements could include:
(e)on television or radio;
(f)in magazines or brochures;
(g)on billboards or posters;
(h)in pamphlets or other materials provided at point of sale;
(i)to reporters, including in relation to the proceedings or potential proceedings; and
(j)online (including the plaintiff’s websites or other websites) or in social media, including Facebook, Instagram, Twitter, YouTube, LinkedIn and TikTok.
7. Any documents that record the scope of any of the Godfrey Hirst Claims, in particular:
(a)what type of "ad executions" were placed in which media;
(b)how often advertisements were placed;
(c)the dates that advertisements were placed; and
(d)what the likely reader/viewership of the media is.
8. Any documents relating to the preparation of any of the Godfrey Hirst Claims, including:
(a)any communications with advertising agencies regarding potential marketing campaigns, including any briefing documents, requests for proposals or tenders, or related documents;
(b)any instructions given to an advertising agency; and
(c)any campaign proposals by the chosen advertising agency, including draft designs and wording prepared by the advertising agency, whether adopted or not.
9. Any results of qualitative or quantitative testing, including focus group testing, of any of the Godfrey Hirst Claims, either prior to or following launch.
10. Any advice provided by Godfrey Hirst to, or received by Godfrey Hirst from, third parties in relation to any of the Godfrey Hirst Claims, prior to, or following, publication of the Godfrey Hirst Claims.
11. Any documents recording metrics from any of the Godfrey Hirst Claims, including:
(a)any media metrics, in particular any summary statistics including metrics about the campaign, such as reach, frequency, gross rating points, target audience rating points etc;
(b)for online channels (such as advertising and social media websites and influencers), any data showing engagement, referrals, sentiment and conversations during and after the campaign;
(c)formal and informal feedback from retailers;
(d)formal and information feedback from consumers on the campaign, including any complaints made to the plaintiff or to other organisations such as the Advertising Standards Authority; and
(e)any research or studies done on the impact of the advertising on consumers.
Communications with Commerce Commission
12. All documents relating to and including communications between Godfrey Hirst and the Commerce Commission that relate to or touch upon:
(a)any aspect of the Going Good Campaign; or
(b)any statement made by the defendants and relied upon by Godfrey Hirst in the statement of claim.
Communications with industry
13. All documents relating to and including communications between Godfrey Hirst and any retailer, manufacturer, distributor or wholesaler of carpet in New Zealand, or supplier of materials used in the manufacture of carpet that relate to or touch upon:
(a)any aspect of the Going Good Campaign; or
(b)any statement made by the defendants and relied upon by Godfrey Hirst in the statement of claim.
Godfrey Hirst internal communications
14. All documents relating to and including communications within Godfrey Hirst that relate to or touch upon:
(a)any aspect of the Going Good Campaign; or
(b)any statement made by the defendants and relied upon by Godfrey Hirst in the statement of claim.
For the most part Godfrey opposes this application.
The governing principles
[5]Discovery is governed by pt 8 of the High Court Rules 2016.
[6] The principles are not without their complications, but for present purposes the important points are as follows:
(a)On commencing a proceeding in the case of a plaintiff, and on entering an appearance in the case of a defendant, each party must furnish the other parties with what the Rules refer to as initial disclosure.1 This consists of key documentation which the party in question refers to in its pleadings and any additional documents in their control that that party has used when preparing the pleading and on which that party intends to rely.2
(b)Once the proceeding is underway, parties may seek discovery of two types — standard or tailored.3
(c)An order for standard discovery requires the party providing discovery to discover documentation on which that party relies, documentation that may adversely affect that party’s case, documentation that may adversely affect any other party’s case and documentation that may support any other party’s case.4 Generally speaking, those requirements contemplate discovery of more direct relevance than under earlier rules.5
1 High Court Rules 2016, r 8.4.
2 High Court Rules 2016, r 8.4(1)(b).
3 High Court Rules 2016, rr 8.6 and 8.6.
4 High Court Rules 2016, r 8.7.
5 Robert Osborne (ed) McGechan on Procedure (Online ed, Thomson Reuters) at [HR8.7.01(1)].
(d)Tailored discovery requires a party to discover documentation in particular categories6, and must be ordered when the interests of justice require.7
(e)There is a presumption that the interests of justice require tailored discovery in proceedings that involve allegations of fraud or dishonesty.8
(f)There is some controversy as to whether, once categories are identified, the party must discover all documentation within each category or only relevant documentation within each category. There are authorities pointing both ways. The overarching principles relating to evidence and discovery are that only material which is relevant on the pleadings is admissible evidence.9 Thus, I am inclined to the latter view in which relevance to an issue in the proceeding is the starting point.10
(g)In addition, an important principle in the Rules and their associated schedules is proportionality.11 Very broadly speaking, the principle is that the burden of discovery on any party in any case should not be disproportionate to the nature of the case itself. For example, in a case that does not involve matters of significant public interest but merely the private rights of the parties concerned, and which is not of existential significance to the parties, discovery is likely to be comparatively limited. To provide a more concrete illustration of how this principle may work, where the parties are contemplating tailored discovery in such a case, even if there is a prospect of discovery revealing relevant documents, if the exercise is likely to involve considering a vast amount of material, the Court may nevertheless
6 High Court Rules 2016, r 8.10.
7 High Court Rules 2016, r 8.8.
8 High Court Rules 2016, r 8.9(c).
9 Evidence Act 2006, s 7.
10 ASB Bank Ltd v Commissioner of Inland Revenue [2014] NZHC 2184, (2014) 26 NZTC 21-098 at [7]; see also InterCity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 1054 at [15].
11 High Court Rules 2016, sch 9 cl 3; see also Commerce Commission v Cathay Pacific Airways Ltd
[2012] NZHC 726 at [12].
regard this as disproportionate in the circumstances and decline the order sought. The resources of the parties and delay are also relevant considerations.12
Relevance to issues in the proceeding
[7] In order adequately to gauge whether the documents sought by Bremworth are relevant to any issue in the proceeding, it is first necessary to identify the issues. Godfrey alleges on four related bases that Bremworth has engaged in misleading or deceptive conduct contrary to s 9 of the Fair Trading Act 1986. Although s 9 is primarily aimed at protecting consumers, its broad ambit means that it may also be enforced by a rival trader.13 Section 9 provides that “No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
[8] Thus, the issue in the substantive proceeding will therefore be whether Bremworth’s advertising campaign about which Godfrey complains was misleading or deceptive likely to mislead or deceive.
Discussion
Categories 5 and 6
[9] In these categories, Bremworth seeks discovery of documentation published by Godfrey which makes claims that are the same or similar to those made by Bremworth, about which Godfrey complains.
[10] On behalf of Bremworth it is contended that such material may be relevant because, as Ms Dong put it, it would indicate that Godfrey is not coming to this case “with clean hands”. Ms Dong also submits that the documents in this category are relevant to how consumers would understand the representations in issue in the substantive hearing in the context of the market, and whether they are likely to be considered misleading or deceptive.
12 Commerce Commission v Cathay Pacific Airways Ltd, above n 11, at [18].
13 Taylor Bros Ltd v Taylors Group Ltd [1988] 2 NZLR 1 (CA); and Red Eagle Corp Ltd v Ellis
[2010] NZSC 20, [2010] 2 NZLR 492.
[11] In the context of what is effectively a claim pursuant to commercial legislation, the introduction of that rather quaint phrase from equity’s lexicon is not perhaps entirely apt. The contention advanced by Mr Dixon QC on behalf of Godfrey is that any such material is irrelevant because it is not Godfrey’s actions that are to be scrutinised at trial but rather Bremworth’s.
[12] I can see that such documentation might have some relevance, essentially in relation to relief, because it may raise serious questions about whether any loss or any adverse consequences for members of the public was caused as much by the actions of Godfrey as by the actions of Bremworth. However, in the end, it is unnecessary to dwell on this because Godfrey is not resisting providing discovery in these two categories.
[13] The only issue is whether a formal order should be made. On Godfrey’s behalf Mr Dixon resists such an order because Godfrey is agreeable. However, as a matter of principle, I think an order should be made.
[14] That does not reflect adversely in any way on Godfrey or suggest that it may not do what it proposes to do. It is simply a matter of ensuring that the Court has proper control over the process.
Categories 7 to 11
[15] Effectively, the documents in these categories are a layer below any marketing material that Godfrey will need to discover from categories 5 and 6. The view I am inclined to is that, between categories 5 and 6, which are comparatively general in their nature, and categories 7 to 11 which are far more specific, the line between proportionate and disproportionate discovery is crossed.
[16] There is evidence that an electronic search based on obvious search-terms over categories 7 to 11 is likely to throw up a very large number of documents, and that it would be difficult to winnow those down by more refined searches. Additionally, it is not obvious to me that a minute examination of this source material is likely to assist materially to resolving the core issue in the case which is whether Bremworth’s marketing was misleading or deceptive.
[17] On behalf of Godfrey, Mr Dixon also alleges that category 10 is too vague, and I agree.
[18] On those bases, I decline to make an order that Godfrey provide discovery in categories 7 to 11.
Category 12
[19] As I understand it, prior to commencing this proceeding, Godfrey made a complaint to the Commerce Commission, which refused to pick up the cudgels as it was invited to do. As I understand it, this request for discovery is directed at eliciting any views that the Commission may have formed and communicated to Godfrey as to the substantive merits of the claim.
[20] On behalf of Bremworth Ms Dong submits that any such documents may be relevant because:
(a)they would illustrate how the Commission viewed Bremworth’s marketing materials;
(b)they would show what information Godfrey provided to the Commission in relation to Godfrey’s similar materials;
(c)they would illustrate Godfrey’s knowledge of Bremworth’s marketing materials prior to the beginning of these proceedings;
(d)they would explain the delay in Godfrey raising their contentions with Bremworth directly; and
(e)they would show what actions Godfrey took in relation to its own marketing materials prior to instituting these proceedings.
[21] Mr Dixon counters on behalf of Godfrey that any views that the Commerce Commission may or may not have formed and communicated are entirely irrelevant.
[22] I agree. I cannot see how any views that the Commerce Commission may have formed can have any bearing on the outcome in this case, especially when Godfrey has indicated it does not wish to pursue its claim for damages. I decline to make the order sought in respect of this category of document.
Category 13
[23] Bremworth seeks documentation evidencing the terms upon which Godfrey communicated with manufacturers, wholesalers, distributors, or retailers of carpet in New Zealand, relating in any way to Bremworth’s advertising campaign.
[24] As Ms Dong submits on Bremworth’s behalf, it is conceivable that in any such communication Godfrey expressed views which might be relevant to the position it takes in this proceeding. A retailer may be disadvantaged by misleading or deceptive conduct in much the same way as a member of the general public, where they fall within the target audience for the relevant representations.14
[25] Mr Dixon submits that as this case is about the impact of Bremworth’s advertising on the public, rather than on industry participants, Ms Dong’s submission does not meet the point.
[26] I am satisfied that there is a reasonable prospect that any documentation in this category may be relevant to the issues in the case and that requiring them to be discovered is not disproportionate in the circumstances.
Category 14
[27] I can see no objection whatsoever to Godfrey being required to discover documentation in this category.
[28] Indeed it would appear to me that an order for standard discovery would necessarily require discovery of relevant documentation in this category.
14 Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd [2014] NZCA 418, [2014] 3 NZLR 611 at [50].
Conclusion
[29] For those reasons I make orders requiring Godfrey to provide tailored discovery of the documentation set out in categories 5, 6, 13 and 14 of the schedule to Bremworth’s application as replicated at [3].
[30] Costs are reserved. My preliminary view is that as both parties have had a measure of success costs should be left to lie where they have fallen. However, if either party wishes to apply for a costs order, then they may do so by memorandum within ten working days of the date of this judgment. Any response is to be filed and served within a further ten working days.
Associate Judge Johnston
Solicitors:
Chapman Tripp, Wellington for Plaintiff Russell McVeagh, Auckland for Defendants
0
5
1