BEGAs can’t be choosers
The plaintiff (Fonterra) and defendant (Bega) are both significant “forces” in the Australian dairy products industry. Bega’s product range includes products that are marketed and sold by Fonterra pursuant to a trade mark licensing agreement (TMLA). In 2017, Fonterra initiated the main proceeding, seeking to restrain Bega’s use of the BEGA trade mark on certain products. In 2018 Bega filed a counterclaim, alleging breach by Fonterra of the TMLA. Among other things, Bega alleges that Fonterra breached that agreement by failing to: promote, properly market and develop sales of Bega branded products; ensure that the good name and image of the trade marks is maintained; and not give undue preference to Fonterra-owned branded products. In response, Fonterra seeks rectification of the TMLA and to restrain Bega from terminating it. As Associate Justice Daly observed, the parties are “engaged in a ‘commercial war’” and there are “no indications of peace breaking out soon”.
In the course of the proceedings, Bega discovered a number of commercially sensitive documents relating to its products that are not marketed by Fonterra (non-Fonterra Bega products), including its marketing plans, contract pricing and pricing strategies for non-Fonterra Bega products, and financial information and product development information concerning Bega’s business generally (collectively, the Bega confidential documents). By the present interlocutory application, Bega sought to limit inspection of the Bega confidential documents to Fonterra’s external lawyers and independent experts, and only for the purposes of the main proceeding.
A confidentiality regime is in place in respect of Fonterra’s discovered confidential documents with similar limitations in place, save that Bega’s CEO and CFO also are permitted access to those documents. Fonterra accepted that the Bega confidential documents are commercially confidential, but argued that the circumstances do not warrant the restrictions to access sought by Bega. In the alternative, Fonterra sought to expand the persons entitled to access the Bega confidential documents to its director of consumer sales and marketing, its director of foodservice, and its in-house counsel. Bega’s alternative position was that if Fonterra personnel are permitted access, that should be limited to persons equivalent to the Bega executives entitled to access Fonterra documents, and Fonterra’s in-house counsel (as long as Bega’s in-house counsel is permitted access to Fonterra documents).
It is well-established that the mere fact that documents are confidential is not of itself a sufficient basis to restrict disclosure to an opposing party and its legal representatives. The implied Harman undertaking (in truth, in the authors’ view, better expressed as an “obligation” rather than an “undertaking”) protects a disclosing party against collateral use of its discovered documents. But a question may arise where there is “a real risk that significant harm may be caused to a party beyond what is justified in the circumstances of the case” (per Elliott J in IOOF Holdings Ltd v Maurice Blackburn (No 2)  VSC 594).
More recently, on this issue the Court of Appeal in Cargill Australia Ltd v Viterra Malt Pty Ltd  VSCA 260 observed at - that a key question is:
whether the parties are trade rivals. The parties’ status as trade rivals is significant because it informs the magnitude of the risk of loss of confidentiality, and the potential prejudice resulting from such loss, if access to such documents is not restricted to the opposing party’s external lawyers and independent experts who give confidentiality undertakings.
Accordingly, the parties’ status as trade rivals is a material consideration to a court’s determination of who should be given access to confidential discovered documents. The subject matter of the litigation and the identity, role, expertise and experience of every person whom a party nominates to be a recipient of confidential documents discovered by the opposing party subject to the giving of a confidentiality undertaking are important to that determination. The scope of confidentiality undertakings to be given by those persons and the nature and efficacy of any sanctions that may be available against them for breaches of such undertakings are also important.
A significant question in the present interlocutory application therefore was whether Bega and Fonterra could be classified as “trade rivals”, although her Honour also observed that the absence of a trade rivalry would not be fatal to an application for confidentiality restrictions over and above the Harman obligations. The evidence was that the non-Fonterra Bega products all are products that Fonterra does not produce or sell, nor plans to produce or sell in the near future; so on a narrow interpretation, the parties are not trade rivals in respect of the subject matter of Bega confidential documents relating to such products. Associate Justice Daly accepted, however, Bega’s submission that in the fast-moving consumer goods (FMCG) industry, high staff turnover could easily see former Fonterra personnel working for a direct competitor of Bega without the confidentiality obligations that would attend former Bega personnel in a similar position. Further, even though Fonterra and Bega’s products sit in different segments of the FMCG market, there is enough of a competitive relationship and shared customer base between the parties that disclosure of certain types of information could harm Bega.
There being sufficient “trade rivalry” between the parties, Daly AsJ then considered individual categories of Bega documents. The question ultimately rested on the centrality of each category to the pleaded issues, the seniority and role of the Fonterra staff for whom access was sought by Fonterra, and the degree of sensitivity of the documents to Bega and (in the case of third party agreements) its customers. In particular, the “Bega” brand was central to the issues in a way that Fonterra’s own brands were not.
In some cases, this warranted the implementation of an access regime that did not precisely mirror the regime in place protecting the Fonterra documents. For example, Fonterra’s nominated senior marketing staff were appropriate to inspect Bega’s marketing plans, because the manner in which Bega planned to use the BEGA mark was relevant to Fonterra’s claim for an injunction; a reciprocal consideration was not true of Bega’s claims against Fonterra. In other cases, the regime was relaxed only in respect of documents relating to a subset of Bega products. For example, Bega’s marketing plans for products outside the TMLA that would be branded “Bega” were relevant to Fonterra’s trade mark claims, but its plans for non-Bega branded products were not. In other cases where it was difficult to assess the likely prejudice to Fonterra of non-access compared to the extreme sensitivity of a category of documents to Bega and its customers, it was appropriate to defer the application pending a review of the documents by Fonterra’s external lawyers.