Winnebago Industries, Inc v Knott Investments Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1355 of 2010

AND: KNOTT INVESTMENTS PTY LTD (ACN 000 596 798)

SYDNEY CAMPERVAN & MOTORHOME RV CENTRE PTY LTD (ACN 112 316 560)

BRISBANE RV'S CARAVANS AND CAMPERS PTY LTD (ACN 102 806 520)

A & K CARAVANS AND MOTOR HOMES PTY LTD (ACN 100 888 748)

JUDGE: YATES J DATE: 3 NOVEMBER 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The applicant seeks an order pursuant to s 47A(1) of the Federal Court of Australia Act 1976 (Cth) (the Act) that the evidence of Randy J Potts and Oliver Herzfeld be given by videolink. The application is opposed by the respondents.

Background 2 Mr Potts and Mr Herzfeld are witnesses to be called by the applicant at the hearing of its claim for damages against the respondents consequent upon findings made that the respondents engaged in passing-off and contravened various provisions of the Trade Practices Act 1974 (Cth), in respect of conduct up to January 2011, and The Australian Consumer Law (Competition and Consumer Act 2010 (Cth) Sch 2), in respect of conduct thereafter: Winnebago Industries, Inc v Knott Investments Pty Ltd (No 2) (2012) 293 ALR 108. 3 Mr Potts is the Chief Executive Officer of the applicant and has made an affidavit concerning: some features of the manufacture of recreational vehicles and how this compares with the manufacture of automobiles, like passenger cars and trucks; and certain aspects of the licensing arrangement the applicant has entered into with Winnebago RV Pty Limited (WRV) in relation to the manufacture and distribution of Winnebago branded recreational vehicles in Australia. 4 The reason advanced for requesting that Mr Potts give evidence by videolink is that he has had scheduled for "some time", not more precisely identified, investor relations meetings on the East Coast of the United States of America, including in New York City and Boston, on two or three days commencing 17 November 2014. The applicant says that, as a publicly listed company, it is very important for it to meet regularly with investors to keep them informed of its performance, how businesses is going, and its plans and activities. I have been told that the applicant regularly holds such investor relations meetings attended variously by one or more of its senior executives, including Mr Potts, supported by the applicant's Investor Relations Manager. 5 Mr Herzfeld is Senior Vice President and Chief Legal Officer of The Beanstalk Group, a global brand licensing agency and consultancy. Mr Herzfeld has made two affidavits concerning the question of what would be a reasonable commercial arm's-length licence fee, and other terms, for use of the Winnebago name and logo, owned by the applicant, as a vehicle brand name and business name, by an Australian manufacturer of recreational vehicles, in the period late 2004 to late 2013. 6 The reason advanced for requesting that Mr Herzfeld give evidence by videolink is that he is afraid of flying and avoids plane travel as much as possible. I have been informed that Mr Herzfeld travelled to Las Vegas from New York earlier in 2014 for a speaking commitment but, other than that trip, has not undertaken a long plane flight for a number of years. I have been informed that Mr Herzfeld has suffered from a fear of flying since the 9/11 World Trade Center attacks in New York in September 2001. I have been further informed that Mr Herzfeld's office was close to the World Trade Center and that he observed gruesome scenes that were traumatic to him. Mr Herzfeld works in New York City and lives in the New Jersey area, and generally seeks to avoid travelling too far away from these areas. 7 The respondents oppose the application. They say that the applicant has not demonstrated a persuasive case for these witnesses to give evidence by videolink in light of their objections as "cross-examining party": see the discussion of general principles in Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) (2009) 181 FCR 152 at [61]-[78]. 8 By way of summary, the respondents submit: Mr Herzfeld will be giving evidence of a contested opinion, as well as direct but contested evidence of some facts; Mr Potts will also be giving evidence of certain facts which are contested, including his company's reasons for agreeing to an effective royalty rate with WRV in Australia of 1%, when the applicant is claiming from the respondents damages based on a royalty rate of 5-14%; it is not agreed that their evidence can be fairly tested by videolink; their evidence is central to the applicant's case on damages; the respondents' ability to cross-examine Mr Herzfeld and Mr Potts will be significantly inhibited by not having them personally present, as the respondents will wish to cross-examine both witnesses on matters of credit and to take both witnesses to certain documents in the course of cross-examination; and the evidence to be cross-examined upon is highly relevant to the applicant's case on damages, involving complex issues of business accounting and licensing calculations.

Consideration 9 I am not persuaded that I should accede to the application insofar as it concerns Mr Herzfeld. Whilst I have sympathy for his fear of flying and his desire to avoid long plane travel, I anticipate that Mr Herzfeld's evidence will be central to the case to be brought against the respondents at the damages hearing. I anticipate that his cross-examination will be quite lengthy. I accept that there may be a need to put a number of documents to him in cross-examination. Whilst I think it unlikely that his evidence will be subject to any significant attack on credit, and whilst I accept his evidence will relate to "technical matters", I hold grave concerns that cross-examination using videolink will provide an effective medium for the reception of that evidence. In short, I accept that the respondents will be materially disadvantaged by requiring cross-examination to take place by videolink. 10 Further, in coming to this conclusion, I have had regard to the fact that it must have been well-appreciated by the applicant that it was almost inevitable that Mr Herzfeld would be required for cross-examination on a matter so contentious as the royalty rate and terms on which a licence to manufacture and distribute Winnebago branded vehicles in Australia would be granted. As the respondents persuasively point out, Mr Herzfeld's reasons for not wishing to travel to Australia were clearly in existence prior to the time he was engaged as an expert witness. The applicant was not entitled to assume that, having engaged Mr Herzfeld as a witness, his evidence could be given by videolink. 11 I also note that, despite his fears, Mr Herzfeld does travel by plane, albeit it seems infrequently. His desire is to avoid such travel where possible. Unfortunately, I am not persuaded that this is an occasion where that can be avoided, if he is to give evidence in this proceeding. As I have said, I accept that the respondents would be significantly disadvantaged in the conduct of their case if Mr Herzfeld were not personally present for cross-examination. 12 Mr Potts is in a somewhat different position. I should say at the outset, however, that I do not think that his wish to attend investor relations meetings in the United States of America at the time of the damages hearing is, of itself, a sufficient reason for permitting him to give evidence by videolink. The more important consideration, in my view, is the nature of the evidence he is to give. Mr Potts' evidence is undoubtedly important, but it is also somewhat limited. An important topic of his cross-examination will be the reason for the applicant agreeing to the royalty rate and other terms with WRV, bearing in mind the royalty rate which the applicant contends should be used to calculate its claim for damages. The respondents have foreshadowed that it is likely that Mr Potts will be cross-examined on the reason why the applicant did not volunteer in its own evidence the licensing arrangements it has entered into with WRV, and that there may be a challenge to Mr Potts' credit. They have also foreshadowed the need to place documents before him for the purpose of his cross-examination. 13 In considering the present question, a balancing exercise is required in order to determine what will best serve the administration of justice consistently with maintaining justice between the parties: Kirby v Centro Properties Ltd [2012] FCA 60 at [11]; Unilever Australia Limited v Revlon Australia Pty Ltd (No 4) [2014] FCA 1074 at [16]. 14 After some reflection, I have come to the view that Mr Potts should be permitted to give his evidence by videolink, despite the respondents' opposition to that course. 15 The central consideration in my decision is the limited scope of the evidence which Mr Potts will give. Notwithstanding the factors raised by the respondents, I do not think, on topics relevant to the issues to be ventilated at the damages hearing, they will be materially disadvantaged by having to cross-examine Mr Potts by videolink. The fact that there may be a challenge on credit is a consideration I take into account. But it is not a decisive consideration. Insofar as documents may be required to be put to Mr Potts, satisfactory arrangements can be made to achieve that end. If, for that purpose, it is necessary for the respondents to engage lawyers in the United States to facilitate that task then I will order that the reasonable costs of doing so be borne by the applicant, who seeks the indulgence that Mr Potts' evidence be given in this way.

Disposition 16 For these reasons, I will grant the application in respect of Mr Potts, but not Mr Herzfeld. The applicant should pay the respondents' costs of the application. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.