Kraft Foods Group Brands LLC v Bega Cheese Limited

1. The applicants have leave to file and serve a third further amended statement of claim substantially in the form of the document filed with the Court.
2. The applicants pay the costs of the respondent thrown away by reason of the allowing of the amendments.
3. The further trial of the proceeding scheduled to commence on 24 September 2018 be vacated.
4. The further trial of the proceeding be adjourned instead until 12 November 2018 on an estimate of 5 days.
5. The parties are to confer about the terms of all consequential directions, including in relation to the dates upon which further evidence and submissions are to be filed and served, and notify the Court of any agreed directions.
6. Liberty to apply upon the giving of 24 hours' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

O'CALLAGHAN J: 1 On the fourth day of the hearing of the trial of this proceeding, the applicants (Kraft) made an application to amend their statement of claim. The proposed amendments are contained in a draft Third Further Amended Statement of Claim. The amendments concern a subject matter that arises out of the evidence already before the court. But the proposed causes of action are discrete from those the subject of the current trial. After hearing submissions from the parties about whether to allow the amendments, I reserved judgment on the application and continued hearing the balance of the evidence. That was completed last on 14 August 2018 as planned. As things currently stand, the parties will make their closing oral submissions in the week commencing 24 September 2018 (a delay that was originally due to the unavailability of counsel). If the amendments are to be allowed, the respondent (Bega), which resists the application, says that it must be allowed to adduce evidence, including expert evidence, in relation to the new matters raised and that the trial will have to go off until at least November 2018. 2 One important question to be resolved in this proceeding is whether goodwill in the Australian peanut butter business operated by Kraft Foods Limited (later renamed Mondelez Australia (Foods) Ltd) was retained by Kraft Foods Limited and then assigned to Bega in July 2017 when Bega bought the business (as Bega contends) or whether Kraft Foods Limited could never have transferred any such goodwill to Bega because it, at all relevant times, continued to inure to the benefit of Kraft Foods Group Brands LLC, the first applicant, by virtue of an agreement referred to by the parties as the Mondelez Licence (as Kraft contends). The parties do not necessarily agree about the precise characterisation of these important questions, but that description will suffice for present purposes. 3 Each of Bega and the first applicant also asserts that the use by the other of similar packaging, or "trade dress", for peanut butter products is likely to mislead or deceive consumers, and bring claims asserting contraventions of ss 18 and 29 of the Australian Consumer Law and in passing off. Kraft also brings a claim for breach of contract and a claim in respect of certain Bega sponsored television and radio advertisements that it says were misleading or deceptive. Bega also has a claim against Kraft for breach of copyright. 4 Kraft now seeks to add these further claims: 74A. In connection with its sale of peanut butter without the Kraft Brand but with the Peanut Butter Trade Dress from July 2017, until about April 2018, Bega sold and distributed peanut butter in the Impugned Bega Packaging and Bega packaged jars of peanut butter in the Peanut Butter Trade Dress absent the Kraft GroceryCo Trademark, and distributed them to retailers in outer cardboard containers ("shippers") for holding and display which bore the Kraft GroceryCo Trademark. PARTICULARS The periods within which such shippers were supplied to retailers in respect of Stock Keeping Units relating to peanut butter are set out in the table at paragraph 9 of the Affidavit of Matthew Broad herein sworn 19 July 2018. Such shippers were displayed to the public, and continued to be displayed to the public for approximately 21 days after the dates of final dispatch appearing in the table. 74B. The conduct of Bega referred to in paragraph 74A was not authorised under the MTA or otherwise authorized by the Applicants and infringed the rights of the first Applicant in Australian trade mark registrations numbered 156444 and 181518 under section 120(1) of the Trade Marks Act 1995 because the contents of the shippers were not finished goods bearing the Kraft GroceryCo Trademark. … 77AA. Further and alternatively, by reason of the matters referred to in paragraphs 74A and 74B: (a) Bega's conduct referred to therein breached the obligations referred to in paragraph 68 (the Transition Clause); and (b) Bega's conduct therein after 31 December 2017 breached the obligations referred to in paragraph 67 (the Discontinuance Clause). … 84A. Furthermore, by reason of the maters [sic] referred to in paragraph 74A and 74B, Bega has represented a connection in the course of trade with the Applicants or that the products in the Impugned Bega Packaging are otherwise associated with the Applicants and has engaged in conduct in trade and commerce which is misleading and deceptive or likely to be so contrary to section 18 and sections 29(1)(a), (g) and (h) of the Australian Consumer Law. … 94. By reason of the matters alleged in paragraphs 86 to 91 and 74A above, Bega has passed off peanut butter in the Impugned Bega Packaging as being supplied by or otherwise associated with Kraft. 5 Kraft says that, although it knew that to some limited extent supermarkets had, for a period, put Bega peanut butter jars in Kraft "shippers" on their shelves, it did not know until Bega filed an affidavit sworn by Mr Broad on 19 July 2018 that Bega (and not the supermarkets) was responsible for Bega jars being in Kraft shippers; that it sent its products in Kraft boxes (which were reduced to the shippers when stacked on the supermarket shelves) to supermarkets until April 2018; and that it did so, so Kraft contends, to 580 supermarkets (a figure that comes from Mr Broad's affidavit). 6 In that regard, it seems to me that there is merit in Kraft's argument that, because until July 2018 Bega was asserting that it had not taken an assignment of the Mondelez Licence, Kraft would not have been inclined to think that Bega would have made use of the Kraft Trade Mark. 7 Kraft submits that its proposed new case is arguable, and that the trial can recommence in September as planned. Kraft submits that will give Bega enough time to put on an amended defence, and for the parties to file further evidence. Kraft also submits, and Bega does not dispute, that if they are not allowed to bring in these amendments now, they will not be allowed in any subsequent proceeding to make the case. 8 Kraft submitted that I should not accept the sworn evidence of Ms Munsie, the partner of the law firm responsible for the conduct of Bega's case, that Bega would require up to six weeks to put on evidence, including evidence: (1) as to the practice of supermarkets in relation to the shippers that they receive from Bega in respect of peanut butter in general; (2) as to what occurred in relation to the specific supermarkets who received such shippers; (3) as to supermarkets' use of shippers more generally - if consumers are frequently exposed to shippers that do not correspond to the products stacked within them, then that would be relevant contextual evidence relating to whether consumers, acting reasonably, would be likely to look to or rely on shippers for guidance, rather than to the labels on the products themselves; (4) from a marketing expert with specific familiarity with supermarket environments to opine on the significance, or otherwise, of shippers; (5) as to the procurement systems used by supermarkets, and as to what is displayed on the relevant software interfaces (which would be relevant to the allegation of trade mark infringement, as explained below). 9 Ms Munsie was not cross-examined. She is an experienced practitioner in this field and I accept her sworn evidence about the need (or apparent need) to adduce evidence of the type she adumbrates and the time required to do so (six weeks). 10 As to the case proposed to be pleaded, Kraft submits as follows: "Kraft seeks to amend its claim to ensure that the claims that properly arise in the full circumstances of the case, as now revealed by Mr Broad's evidence, are finally determined in this proceeding. The matters in Mr Broad's affidavit having come to the attention of Kraft in this proceeding, Kraft would likely [be] estopped or otherwise precluded from having its claims on them adjudicated in any later proceeding if leave to amend were not granted. Thus, provided Kraft has not unduly delayed, it would not be a "just resolution" of the proceeding if Kraft were to be shut out from having those claims heard and determined in this proceeding. A grant of leave would promote the overarching principle, provided that the just resolution of the claims can be achieved with expedition and fairness (as Kraft submits they can). The substantive amendments in proposed 3FASOC all arise on the same confined facts. Those facts are set out in the Affidavit of Matthew Broad herein sworn 19 July 2018 … and filed by Bega, in which (at [8]-[9]) Mr Broad deposes that after its acquisition in July 2017 Bega continued to use "Kraft" branded shippers for a particular period of time, which varied by stock keeping unit, set out in a table showing the "final production" (i.e. factory packing) dates and "final dispatch" dates (i.e., the dates of final dispatch from Bega's distribution centre). Except for 2kg units, the final production dates are no earlier than 18 July 2017 (by which time Bega was branding its peanut butter "The Good Nut"), and many are in late July and in August (by which time Bega was branding its peanut butter "Bega"). The final dispatch dates are all significantly after July 2017, and some are well after 31 December 2017. Thus the evidence is confined, clear and indisputable that from about July 2017 Bega sent peanut butter jars branded "The Good Nut" and then "Bega" to retailers in shippers branded with Kraft trademarks, and furthermore continued to do so for certain stock keeping units of Bega peanut butter after 31 December 2017, until about April 2018. On its face, the affidavit furnishes a proper foundation for clear and confined claims for breach of MTA clause 3.5 by Kraft, and associated ACL claims, and (in paragraph 74A) a trademark infringement claim. The latter claim, whilst not previously raised, merely arises out of trade mark registrations already in evidence. There can be no dispute that those are registered in the name of the first Applicant for peanut butter; the shippers themselves indicate this is presented as a registered trade mark [citing Section 120(1) of the Trade Marks Act 1995 (Cth), which provides: "A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered".] 11 Kraft further submitted that "there can be no dispute the trade mark used is substantially identical to the registrations and is registered in respect of the same goods. The issue of use as a trade mark is a legal analysis undertaking by considering the presentation on the shipper. Nature's Blend Pty Ltd v Nestlé Australia Ltd (2010) 87 IPR 464; [2010] FCAFC 117 at [19]". 12 The legal principles relevant to the question whether the amendments should be permitted were not disputed: see Aon Risk Services Australia Ltd v Australia National University (2009) 239 CLR 175 at 214-215; Cement Australia Pty Ltd v ACCC (2010) 187 FCR 261 at [38]-[45]; and Caason Investments Pty Ltd v Cao (2015) 236 FCR 322, at [16]-[21] (Caason). See also s 37M of the Federal Court of Australia Act 1976 (Cth). The principles relevant for present purposes are conveniently summarised in Caason at [19]-[21] as follows: The power of the Court to grant or refuse leave must be exercised in the way that best promotes the Court's overarching purpose to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: s 37M(3) of the FCA Act and the Federal Court Rules 2011 (Cth) (FCR): Bowen Energy Limited v 2KD Drilling Pty Ltd [2012] FCA 275 at [8], Australian Competition and Consumer Commission v Jutsen (No 2) [2010] FCA 982 at [12]-[13], Suzlon Energy Ltd v Bangad (2011) 196 FCR 259 at [19]; University of Sydney v ResMed Limited (No 5) [2012] FCA 232 at [14]… The Court's power to grant leave to amend is broad and has the remedial objective of ensuring that any defect in the pleadings is cured and that the real questions in the controversy are properly agitated and to avoid a multiplicity of proceedings: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [14] (citing Dwyer v O'Mullen (1887) 13 VLR 933 at 939-940) and [71]. The object of the Court is not to punish parties for mistakes made in the conduct of their case, but to correct errors with the result that a decision can be made on the real matters in controversy: Clough and Rogers v Frog (1974) 4 ALR 615 at 618, citing Cropper v Smith (1884) 26 Ch D 700 at 710-711. Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21] to [22]; Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]… 13 Bega submitted that Kraft ought to have known about the significance of the matters about which it now complains concerning the shippers because it undertook monitoring of supermarkets, and that it is now too late to make the proposed new case. But even accepting that Kraft ought earlier to have delved further into the matter earlier, "[t]he object of the Court is not to punish parties for mistakes made in the conduct of their case, but to correct errors with the result that a decision can be made on the real matters in controversy": Caason, 327 at [20]. 14 Bega also submits that the proposed amendments related to an issue that is not of any "practical importance", but Kraft insists that it is. In circumstances where the claims are arguable, the fact that Kraft seeks to make the amendments, and undertakes (as it is bound to) to pay Bega's not inconsiderable costs occasioned by the amendments, and where Bega's own evidence is that its peanut butter jars were despatched in Kraft boxes/shippers to 580 supermarkets, I do not accept the submission that the amendments are not of practical importance. 15 Although Bega also contends that it would be prejudiced were the amendments to be allowed, the prejudice asserted did not extend much beyond the delay that would inevitably result, and costs. The trial can recommence in mid-November (rather than late September), so the delay is not, in the scheme of things, of much moment. And, as I say, Kraft accepts that it must pay Bega's costs. 16 Bega also submitted that the pleadings were deficient, but the criticisms seem to me to be unpersuasive. In any event, the proposed claims are arguable and would not likely be struck out (cf Caason. 327 at [21]). 17 It seems to me, therefore, that in accordance with the principles set out above, Kraft should be permitted to amend its pleading. It seeks to bring the new claims promptly; they are arguable and significant claims, which if not permitted to be brought now can never be brought; and the delay in the recommencement of the trial is not, in the scheme of things, of much import. As Kiefel CJ and Bell J said recently in Rozenblit v Vainer [2018] HCA 23 at [31] (a stay case): What was said in Aon, albeit in the context of applications for amendment, is a useful reminder of the usual tolerances in litigation. It was there observed that some degree of delay and some wasted costs are inevitably associated with amendments. The pursuit of statutory objectives [like s 37M of the Federal Court Act] does not mean that an application for amendment will be refused. It is the extent of the delay and costs, together with any prejudice that might be caused, which is relevant to the grant or refusal of permission to a party to alter its case. (Footnote omitted.) 18 In my view, for the reasons I have given, this application for amendment is, in all the particular circumstances of the case, within "the usual tolerances in litigation". 19 But as I have also explained, I do not accept Kraft's submission that Bega should be expected to take all necessary steps to prepare its defence and put on evidence by the dates in September when the trial would otherwise have recommenced. Bega has put on sworn evidence that it cannot do that, and it has submitted that it should not be compelled to do that. I accept both the evidence and that submission. The delay is Kraft's responsibility and justice requires that Bega be afforded the time that it says is necessary to prepare its defence. 20 For those reasons, I will allow the amendments sought and direct the parties to confer about directions for the filing of evidence and submissions, with a view to the hearing of the trial recommencing on 12 November on an estimate of 5 days. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.