Zuru New Zealand Limited v Lego Juris A/S
[2023] NZHC 1127
•11 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-875
[2023] NZHC 1127
BETWEEN ZURU NEW ZEALAND LIMITED
First Plaintiff and First Counterclaim Defendant
ZURU TOYS NEW ZEALAND LIMITED
Second Plaintiff and Second Counterclaim DefendantZURU INC
Third Counterclaim Defendant
AND
LEGO JURIS A/S
Defendant and First Counterclaim Plaintiff
LEGO A/S
Second Counterclaim Plaintiff
Hearing: 8-9 May 2023 Appearances:
J W J Graham and T Cleary for Plaintiffs and Counterclaim Defendants
K T Glover and J Oliver-Hood for Defendant and Counterclaim Plaintiffs
Ruling:
9 May 2023
Reasons:
11 May 2023
REASONS FOR RULING (No. 1) OF LANG J
[on waiver of legal advice privilege]
This judgment was delivered by me on 11 May 2023 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
ZURU NEW ZEALAND LTD v LEGO JURIS A/S [2023] NZHC 1127 [9 May 2023]
[1] The parties to this proceeding are both well known manufacturers of plastic toy building bricks. One of the issues I will be required to determine is whether the plaintiffs (together, ZURU) are entitled to a declaration that they will not infringe a trademark held by the defendant, LEGO, if they include a notice on the packaging of their products that the products are compatible with LEGO’s products. This has been referred to as a “compatibility notice”.
[2] ZURU relies in part on s 95 of the Trade Marks Act 2002, which provides as follows:
95 No infringement for honest practices
A person does not infringe a registered trade mark if, in accordance with honest practices in industrial or commercial matters, the person uses—
(a)the person's name or the name of the person's place of business; or
(b)the name of the person's predecessor in business or the name of the person's predecessor's place of business; or
(c)a sign to indicate—
(i)the kind, quality, quantity, intended purpose, value, geographical origin, or other characteristic of goods or services; or
(ii)the time of production of goods or of the rendering of services; or
(d)the trade mark where reasonably necessary to indicate the intended purpose of the goods (in particular as accessories or spare parts) or services.
(Emphasis added)
[3] ZURU contends that it wishes to include the compatibility notice on the packaging of its MAX Build More products to enable potential customers to make an informed decision as to whether to purchase those products. It wishes to advise customers that the products are compatible for use with those manufactured by LEGO. It says that this decision accords with honest practices in commercial matters.
[4] No doubt with this issue in mind, counsel for ZURU opened their client’s case as follows:
…
Walmart [ZURU’s distributor in the United States] did not want to specifically call out the [LEGO] Group and so required “Compatible with Major Brands” to be used instead for the product sold to Walmart.
However, reassured by legal advice that doing so was permissible, ZURU used the statement “LEGO® Brick Compatible” in English, French and Spanish … for the packaging used for the rest of the world.
[5] The first witness for ZURU was one of its two Chief Executive Officers, Mr Nicholas Mowbray. His evidence included the following statements:
46Of course, in deciding to use a compatibility statement on the MAX Build More products that referenced the [LEGO] Groups products, I did not just rely on my own views about the permissibility of compatibility statements. ZURU already had general legal advice around the use of compatibility statements before ZURU started the MAX Build More project. But, around the time we were proposing a compatibility statement on the MAX Build More products, ZURU also sought and obtained specific legal advice on the permissibility of the specific compatibility statements that ZURU used on these products.
47While ZURU is not prepared to disclose the contents of that legal advice, which is privileged, I confirm that it was based on this advice that ZURU proceeded with its “LEGO® Brick Compatible” statements that were used on the MAX Build More Products sold everywhere else other than in Walmart.
[6] Mr Mowbray then went on to say that he understood that ZURU’s senior legal counsel had designed the proposed compatibility statements.
[7] Counsel for LEGO contend that these statements mean that ZURU has waived privilege in relation to the legal advice that it obtained regarding the compatibility statements. They seek access to the specific legal advice to which Mr Mowbray referred at paragraph 46 of his brief of evidence. ZURU contends it has not waived privilege and that LEGO is not entitled to have access to that advice.
Relevant principles
[8] Waiver of legal privilege in the present context is governed by s 65 of the Evidence Act 2006, which provides:
65 Waiver
(1)A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.
(2)A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.
(3)A person who has a privilege waives the privilege if the person—
(a)acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or
(b)institutes a civil proceeding against a person who is in possession of the privileged communication, information, opinion, or document the effect of which is to put the privileged matter in issue in the proceeding.
(4)A person who has a privilege in respect of a communication, information, opinion, or document that has been disclosed to another person does not waive the privilege if the disclosure occurred involuntarily or mistakenly or otherwise without the consent of the person who has the privilege.
(5)A privilege conferred by section 57 (which relates to settlement negotiations or mediation) may be waived only by all the persons who have that privilege.
[9] In the present case the defendant contends the plaintiffs have put the legal advice in issue under s 65(3)(a) by referring to it directly in their opening submissions and in the evidence given by Mr Mowbray.
[10] I consider the most helpful authority in the present context to be the decision of the Court of Appeal in Ophthalmological Society of New Zealand Inc v Commerce Commission.1 In that case an employee of the defendant had sworn an affidavit in support of an application to file and serve an amended statement of claim. This referred to the fact that there had been changes to the legal team assisting the defendants’ senior counsel. It then referred to privileged material, in the form of advice given to the defendant by an economist, that had become both relevant and significant to the resolution of issues raised by the litigation.
1 Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA).
[11] The Court was required to decide whether, for reasons of fairness, the documents underpinning the statements made in the affidavits should be disclosed to the plaintiff. In the High Court, Master Gendall had concluded that disclosure of the economist’s advice went beyond a bare reference but only by a fine margin.2 He decided that the case did not call for the Court to impute waiver. The application was accordingly refused. The Master’s decision was upheld by France J.3
[12] In the High Court, France J had relied on Tau v Durie, a case in which a party enjoying the protection of lawyer client privilege had pleaded that legal advice had been obtained and relied on.4 In that case McGechan J had observed:5
… It is all in the end a matter of fairness. A party cannot expect to put forward the existence of legal opinion, with inference invited as to favourable content, or part of a legal opinion which is favourable, and refuse to disclose the opinion document, or the remainder of it, so enabling the position to be checked. If a party positively advances it, the party must disclose it. Mere passing mention in pleadings may not suffice to call the doctrine into play. I agree immediately that the assertion of the existence of legal opinion by a plaintiff and the simple admission or denial of its existence by the defendant ordinarily would not require that defendant to disclose. There are questions of degree. I do not accept that there is some inexorable standard which arises from some perceived need for invariable certainty.
…
It would, in my view, be quite unfair to permit the first defendant to blow hot as to the existence of content of opinion, but cold on disclosure. I accept there has been an implied waiver within doctrine. Again I allow myself a comment that, questions of principle to one side, disclosure could well be to the first defendant’s ultimately advantage. Indeed I suspect it probably would have occurred eventually, and better now than later.
[13] The Court of Appeal dismissed an appeal against France J’s decision.6 In doing so it observed:
Loss of privilege by imputed waiver
[20] It is well established that a party may lose the benefit of legal professional privilege, including litigation privilege, by its conduct in the course of litigation in relation to the privileged material. As it is of the essence of privilege that the material to which it attaches is confidential, where a
2 Opthalmological Society v Commerce Commission HC Wellington CP 354/97, 23 August 2002.
3 Ophthalmological Society of New Zealand Inc v Commerce Commission HC Wellington CP 354/97, 26 September 2002.
4 Tau v Durie [1996] 2 NZLR 190 (HC).
5 At 194-195.
6 Opthalmological Society of New Zealand Inc v Commerce Commission, above n 1.
party’s use of the material destroys that confidentiality, even if unintentionally, or is inconsistent with the party legitimately continuing to assert it, the privilege is treated as waived. The principle underlying this concept of unintentional implicit or imputed waiver is stated in a frequently cited passage in Wigmore on Evidence (McNaughton ed, 1961) vol 8, para 2327:
“In deciding it, regard must be had to the double elements that are predicated in every waiver, ie, not only the element of implied intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could alone control the situation. There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.”
…
[30] The fairness factor has, however, rightly been treated as of particular importance in cases where partial disclosure of legal advice raises questions over whether natural justice requires disclosure of the whole advice. In the end, however, as Mann v Carnell makes it plan, it is the Court’s objective judgment as to the consistency of the conduct with maintaining the privilege which must be assessed in all the circumstances. That requires close analysis of the particular context: what is the issue in relation to the privilege; how does the evidence relate to that issue; and is there inconsistency that could lead to injustice if the privilege is upheld. The weight to be given to fairness in the Court’s exercise of judgment will differ according to the circumstances including the character of the privilege it is said has been waived which, as n this case it is litigation privilege.
Decision
[14] The reference to legal advice in the present case did not take the form of a passing reference in the pleadings of a type that may not be taken to waive privilege. Rather, it was made in the plaintiffs’ opening address and in the evidence of its first witness of fact. ZURU plainly seeks to have the Court infer that it obtained and acted on legal advice that its proposed compatibility statements did not infringe LEGO’s trade mark and were therefore permissible. It will no doubt contend this is relevant to an assessment of whether it acted in accordance with honest practices in commercial matters as required by s 95 of the Trade Marks Act.
[15] I am satisfied that the disclosure as to the nature of the legal advice that has already been made crosses the line in favour of disclosure. As a matter of fairness,
LEGO should be entitled to view the documents containing the legal advice to which Mr Mowbray referred. If that advice is in accordance with his evidence, ZURU’s claim that it acted in accordance with honest practices in commercial matters will obviously be enhanced. If it is not, the reverse may be the case.
Result
[16] I direct that ZURU is to make available to counsel for LEGO, at this stage on a counsel only basis, all documents comprising the specific legal advice to which Mr Mowbray referred at paragraph 46 of his brief of evidence.
Lang J
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