Red Bull GmbH v Manhaas Industries Limited HC Wellington CIV-2010-485-1866

[2011] NZHC 796

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-1866

BETWEEN  RED BULL GMBH First Plaintiff

ANDRED BULL NEW ZEALAND LIMITED Second Plaintiff

ANDMANHAAS INDUSTRIES LIMITED First Defendant

ANDMANHAAS INDUSTRIES (2000) LIMITED

Second Defendant

Hearing:         28 July 2011

Counsel:         N Taefi for Plaintiffs

N J Robb for Defendants

Judgment:      29 July 2011

JUDGMENT OF THE HON JUSTICE KÓS

[1]      The plaintiffs apply to set aside claims for legal adviser privilege made for two documents listed in part 2 of the defendants’ affidavit of documents.

Background

[2]      The first plaintiff is the manufacturer of “Red Bull”, an energy drink.  The second plaintiff is its wholly owned New Zealand distributor.  The first plaintiff is the owner of trade mark devices for “Red Bull”, “Kratingdaeng”1 and a “double bull device”. The “Kratingdaeng” mark is registered trade mark 250773.

[3]      In 2008 the plaintiffs became aware that the defendants were importing and

distributing an energy drink in New Zealand called “Kratingdaeng”.  The packaging

1      The Thai translation of “Red Bull”.

RED BULL GMBH v MANHAAS INDUSTRIES LIMITED HC WN CIV-2010-485-1866 29 July 2011

bore the trade marked double bull device.  The sole director and shareholder of the defendant companies is a Mr Marghal (Michael) Singh Manhaas.

First set of proceedings

[4]      The plaintiffs then issued proceedings against the defendants alleging trade mark infringement, breach of the Fair Trading Act and passing off.   Those proceedings were issued on 11 September 2009.

[5]      By way of response the second defendant filed an application for revocation of the first plaintiff’s registered trade mark 250773 (the “Kratingdaeng” mark).   It also filed its own trade mark application in respect of that word.

[6]      The proceedings were settled on 12 May 2010.  As part of the settlement, the defendants undertook to:

(a)       withdraw  their  trade  mark  application,  and  not  thereafter  seek  to

register the trade mark “Kratingdaeng” or any similar mark; and

(b)withdraw the revocation action that they had commenced in respect of the first plaintiff’s trade mark 250773, and not thereafter attack that registration.

[7]      As part of the settlement the parties filed a joint memorandum in the High Court requesting orders be made for an injunction restraining the defendants (and their directors, servants or agents) from distributing beverages bearing trade marks covered by the settlement agreement.

[8]      An order in those terms was made by the High Court on 1 June 2010.

New applications

[9]      New applications (one for revocation of the plaintiffs’ trade mark 250773 and one for registration the trade mark “Kratingdaeng”) were made by a Mr Bir Singh on

8 June 2010.  The identity of Mr Singh was a mystery for some months.  But the plaintiffs speculated he was connected with the defendants.

[10]     Their suspicions were reinforced by the fact that Mr Singh’s patent attorney, Mr Pietras, had also acted for the defendants.  There is evidence before me that the terms of the new revocation application are “virtually identical” to the revocation application that had earlier been filed by the defendants.  The latter had of course been withdrawn as part of the settlement agreement.

[11]     Putting two and two together, the plaintiffs’ solicitors wrote to the defendants’ solicitors on 15 July 2010. They said the plaintiffs considered the defendants were in breach of the settlement agreement by procuring the filing of Mr Singh’s application. They said Mr Singh was surely the defendants’ agent.  And they said all this was a

breach of the Court’s injunctive orders against the defendants.

[12]	In response the defendants’ patent attorney, Mr Pietras, wrote: ... any dispute involving Manhaas Industries does not appear to be relevant
to this matter.  The applicant for trade mark application number 825360, and for  revocation  of  number  250773,  is  Mr  Bir  Singh.   We  are  acting  on instruction from Mr Singh.
[13]	A few days later, the defendants’ solicitors, A J Park also responded.	Their

letter says:

I was instructed yesterday that Manhaas have nothing to do with Mr Singh and you should address your demands to Mr Singh.

[14]     But that statement was quite untrue, as we shall see.

Second set of proceedings

[15]     The present proceedings were issued on 21 September 2010.  Mr Singh is not presently a party to them.

[16]     The plaintiffs allege the defendants have breached the settlement agreement

by  applying  to  register  the  trade  mark  “Kratingdaeng”  and  again  applying  for

revocation of the first plaintiff’s trade mark 250773.  The plaintiffs allege that Mr

Singh is the agent of the defendants.

[17]     The defendants say that he is not, that they are not the owner of Mr Singh’s

trade mark application, and that they cannot withdraw it.

[18]     Interrogatories were issued by the plaintiffs.   In April 2011 answers were received.  The answers were given on oath, sworn by Mr Manhaas.  The first point disclosed was  that  Mr Singh  is  in  fact  the brother of Mr Manhaas.    Secondly, Mr Manhaas admitted that the two had discussed the defendants’ revocation action against the first plaintiff’s trade mark “many times”.  Thirdly, Mr Manhaas claims to have “objected” to Mr Singh’s “idea regarding his application for revocation”.

[19]     These answers show that the statement made, particularly in AJ Park’s letter,2 was simply untrue.   I do not criticise A J Park for that.   It is clear they had been misled by their clients, the defendants.

[20]     The inference as to untruth by the defendants is reinforced when one looks at what is now said by Mr Pietras.   That is found in his affidavit in answer to the present application to set aside privilege.3    Mr Pietras says that the two privileged

documents, which he wrote on 4 and 8 June 2010,4 were sent to Messrs Manhaas and

Singh jointly.   He says they concerned a trade mark issue.   Obviously, as the documents have been disclosed as relevant, that issue must have been something to do with the issues in the present proceeding.

[21]     And  then,  further  reinforcing  the  fact  of  connection  in  June  2010,  the defendants  now submit  in  answer to  this application that the advice is actually subject to joint interest privilege.

[22]     So we speed across a spectrum of association between the defendants and

Mr Singh from their first, supposedly, having “nothing to do with [each other]” to a

submission that the two June 2010 emails are covered by joint interest privilege.

2 See at [13].

3 See at [29].

4 The new applications were filed on 8 June 2010: see at [9].

[23]     I do not accept for one minute that the defendants had nothing to do with

Mr Singh in June 2010.

Claim to privilege

[24]     On  9  February  2011  the  defendants  filed  and  served  their  affidavit  of documents.  It is sworn by Mr Manhaas.

[25]     Two documents, listed in part 2 and the subject of the claim for legal adviser privilege, were described simply as emails dated between 4 June 2010 and 8 June

2010 between the defendants’ patent attorney, the first defendant and an unnamed

third party whose email address was identified as [email protected].

[26]     Such a listing did not comply with Rule 8.21.  Sufficient detail must be given, particularly in the case of privileged documents.  That is so a potential challenge to privilege  can  be  considered  properly.    The  identity  of  all  recipients  must  be disclosed.

[27]     Tackled on this point, the defendants eventually identified the holder of that email address as Mr Singh.   (His fraternal qualities were revealed about the same time.)5

[28]     On 11 May 2011 the plaintiffs applied to set aside the claim to privilege. Two grounds were advanced:

(a)       that the documents were not protected by legal adviser privilege at all and

(b)that if there was such privilege, it had been waived by reason of the disclosure of the documents to Mr Singh.

[29]     The defendants filed a short affidavit from their patent attorney, Mr Pietras. He was the author of the two emails.  He states:

5 See at [18].

The emails comprise legal advice concerning intellectual property, in particular trade mark.  The advice is relevant to the affairs of both Michael Manhaas and Bir Singh.  The advice is confidential.  The advice was given to  Michael  Manhaas  and  Bir  Singh  on  the  basis  that  the  advice  was privileged legal advice.

Arguments

[30]     Counsel for the plaintiffs, Ms Nura Taefi, placed considerable and perfectly proper emphasis on the inconsistency in the stances of the defendants, as discussed above at [19] – [23].  Secondly, Ms Taefi submitted that the privilege asserted in the affidavit documents was not that of the defendants at all:  Mr Pietras said the advice was provided to Messrs Manhaas and Singh, neither of whom are parties to the proceeding.   Thirdly, if the privilege was the defendants’, then disclosure of the privileged advice to Mr Singh constituted disclosure to a third party – one with whom the defendants were contemporaneously at pains to distance themselves from

– and that that was inconsistent with a claim of privilege on behalf of the defendant. In short, a waiver argument.

[31]     Mr Nigel Robb, who appeared for the defendants, submitted that Mr Pietras’ affidavit should be taken at face value – i.e. that Messrs Manhaas and Singh had obtained  the  advice jointly,  and  therefore held  a joint  interest  in  the  privileged advice.  Both treated the advice as confidential and privileged, and the fact that they received it together was not inconsistent with the existence of privilege.   Legal advice is given to multiple clients all the time.  It followed that receipt of the advice by Messrs Manhaas and Singh jointly did not constitute waiver by either of his own privilege.  As to the plaintiffs’ submission that Mr Pietras’ affidavit was inconsistent with privilege being vested in the defendants, Mr Manhaas was the director, shareholder and alter ego of the defendants.  He may have received the advice in his capacity as director, but even if not, the defendants and Mr Manhaas had a common interest in relation to privilege and the defendants were bound to assert privilege in those circumstances.

Inspection

[32]     I have inspected the two documents.   Ordinarily the Court will accept an affidavit from one of its own officers at face value.6   But Mr Pietras, although he has a law degree, does not practice as a solicitor.  More significantly, issues arose in the hearing as to whom the advice was delivered to, and the capacity in which Mr Manhaas  received  it.    The  answers  were  not  clear  on  the  face  of  the  affidavit evidence. This required me to examine the documents for myself.

[33]     Having done so, it is clear that the emails comprise legal advice covered by s

54(1) of the Evidence Act 2006.   That is, legal adviser privilege applies to them. They are (as Mr Pietras has said) directed to Messrs Manhaas and Singh jointly.  I infer from their content that Mr Manhaas is (as Mr Robb submitted) a recipient in his capacity as director of the defendants.

[34]     That is all I need say about what I saw.

Joint interest privilege

[35]     Joint interest privilege plainly applies to the two documents.   That is, the legal adviser privilege is jointly held by Messrs Manhaas (in his capacity as director of the defendants) and Singh.7     Such privilege is of course of long standing at common law, and is now provided for expressly in s 66 of the Evidence Act 2006.

[36]     Because of that status, the plaintiffs’ submission that the disclosure of the

advice to Mr Singh amounted to a waiver of privilege, is misconceived.   For the same reason, no issue of the common interest exception to waiver arises.

6      Foley’s Transport Ltd v Weddel New Zealand Ltd (1996) 9 PRNZ 392 (HC).

7      Kupe Group Ltd v Auckland City Council (1989) 2 PRNZ 60 (HC); Cross on Evidence (looseleaf ed, LexisNexis, Wellington) at [66.3]; Matthews & Malek Disclosure (3 ed, Sweet & Maxwell, London, 2007) at [11.74].

[37]     In a sense this may seem to the reader a hard case.   The plaintiffs suspect Messrs Manhaas and Singh of collectively cooking up a new revocation application, in  direct  breach  of  the  defendants’ obligations  under  the  settlement  agreement. Viewed in the abstract,8 perhaps the best evidence of that inferred conspiracy might be the advice they were obtaining from their joint patent attorney – the documents for which privilege is claimed.  That advice might also record what their instructions were.

[38]     So why are the plaintiffs denied access to this potential smoking gun?  There are two reasons.

[39]     First, the Privy Council reiterated in B v Auckland District Law Society9  the continuing importance of legal adviser privilege.   And the explicit retention, with only modest modification, of the privilege in the Evidence Act 2006 confirms that assessment.  It is in the interests of an ordered society that people may obtain legal advice (including from a patent attorney – that is expressly provided for in s 54) so they may understand their rights, and act accordingly, without fear that what they say to the lawyer, and what the lawyer says to them, will then be served up on a plate in litigation disclosure.   It is a rule of common efficiency as much as it is a rule protecting individual civil rights.   Society should be better ordered, with less disruption by unlawful acts, if such advice is able to be taken and the participants in the advisory process are able to be candid with one another.

[40]     Secondly, the common law (and s 67 of the Evidence Act 2006) permit a very limited exception  to  legal  adviser privilege  where a  communication  is  made or received “for a dishonest purpose” or to “aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence”.   So the protection is not absolute.  But a very high threshold applies

before one can enter the s 67 exception, including the “dishonest purpose” aspect.

8      I make no comment whatever about what I saw, and nothing is to be inferred.

9 [2004] 1 NZLR 326 (PC).

Clearly that can be less than an offence.   But at common law at least, inducing a breach of contract did not qualify.10    What is needed is fraud, sham or trickery,11 although a perhaps less stringent test was suggested by Laurenson J  in  Gemini Personnel Ltd v Morgan & Banks Ltd of conduct (1) prejudicial to the interests of another, (2) sufficient to attract a civil remedy, and (3) attended by dishonesty, i.e. “conscious deception or sharp practice”.12

[41]     Ms Taefi did not consider the plaintiffs able to rely on s 67 in the present application.  The application was brought in reliance on ss 59 and 65 only, the joint interest privilege submission was made only at the hearing, and neither party has had a fair opportunity to address s 67.   The dismissal of this application is therefore without prejudice to any further application brought under s 67.

[42]     So there it is.   The fact that defendants, Mr Manhaas and Mr Singh were seeking joint advice on a trade mark issue relevant to the issues in this proceeding, in the  days  immediately  prior  to  the  filing  of  the  new  revocation  application,  is naturally a matter the plaintiffs can explore in cross-examination of either individual, should they go into the witness box.   And even if they do not, the plaintiffs are entitled to ask the Court to draw inferences, and the Court is entitled to draw such inferences as it sees fit.   But without the privilege being set aside under s 67, the content of that advice is not something the plaintiffs are entitled to see.

Disposition

[43]     The application to set aside privilege is dismissed.

[44]     The copies of the privileged documents handed to the Court for inspection are to be placed in a sealed envelope in the Court file, and may not be searched by

any person other than the defendants.

10     Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 (ChD); see Mahoney et al The Evidence Act 2006 (2 ed, Thomson Reuters, Wellington, 2010) at 310.

11     Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 (ChD) at 565 (Goff J).

12     Gemini Personnel Ltd v Morgan & Banks Ltd [2001] 1 NZLR 14 (HC) at [18].

[45]     There will be no order for costs.

Stephen Kós J

Solicitors:

Kensington Swan, Auckland for Plaintiffs

A J Park Law, Wellington for Defendants