FEDERAL COURT OF AUSTRALIA

Kraft Foods Group Brands LLC v Bega Cheese Limited (No 3) [2018] FCA 1023

ORDERS

THE COURT ORDERS THAT:

1.    On or before 4pm on 6 July 2018, subject to Mr Peter Hallett of the Applicants’ solicitors providing an undertaking substantially in the form contained in these reasons (the undertaking), Mondelez Australia (Foods) Ltd (Mondelez) provide to Mr Peter Hallett an unredacted copy of each of the agreements (in which Mondelez claims confidentiality) provided pursuant to the subpoena dated 1 June 2008 with access to that document being restricted to:

(a)    Mr Rodney Garratt QC;

(b)    Mr Peter Gray QC;

(c)    Mr Ian Horak of Counsel;

(d)    Mr Peter Hallett of Spruson & Ferguson Lawyers;

(e)    Mr Tim Allen of Spruson & Ferguson Lawyers; and

(f)    any other person that may be agreed in writing with Mondelez,

subject to each such person given access to the aforementioned documents providing the undertaking, and such documents may include a watermark or other notation designed to indicate confidentiality.

2.    On or before 4pm on 6 July 2018, subject to Ms Justine Munsie of the Respondent’s solicitors providing the undertaking, Mondelez provide to Ms Justine Munsie an unredacted copy of each of the agreements (in which Mondelez claims confidentiality) provided pursuant to the subpoena dated 1 June 2008 with access to that document being restricted to:

(a)    Mr Anthony McGrath SC;

(b)    Mr Craig Smith of Counsel;

(c)    Ms Justine Munsie of Addisons Lawyers;

(d)    Mr Hayden Martin of Addisons Lawyers; and

(e)    any other person that may be agreed in writing with Mondelez,

subject to each such person given access to the aforementioned documents providing the undertaking, and such documents may include a watermark or other notation designed to indicate confidentiality.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

1    The applicants in this proceeding, Kraft Foods Group Brands LLC and H.J. Heinz Company Australia Limited (Kraft) are at odds with a non-party, Mondelez Australia (Foods) Ltd (Mondelez) about the terms upon which certain confidential documents are to be provided to the parties. Kraft subpoenaed certain documents from Mondelez. Mondelez, which is a competitor of Kraft, produced the documents to the court pursuant to the subpoena, but it resists production of them in unredacted form other than to two named external solicitors (one acting for the applicant, the other acting for the respondent) on conditions set out below. Kraft and Mondelez cannot agree about the appropriate form of orders to be made to protect the confidential parts of the documents produced. So it is necessary to decide the point.

2    The proceeding concerns a dispute between Kraft and the respondent, Bega Cheese Limited (Bega), about goodwill in the packaging and trade dress of peanut butter.

3    In order to resolve the dispute about the appropriate form of the undertaking, it is necessary to have regard to some fundamental principles.

Principles

4    Where one party to litigation is compelled to disclose documents or information, the party obtaining the disclosure (including by obtaining documents on subpoena) cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. Thus, the law “ensures that there is not placed upon litigants, who in giving discovery are suffering a very serious invasion of the privacy and confidentiality of their affairs, any burden which is harsher or more oppressive ... than is strictly required for the purpose of securing that justice is done”: Hearne v Street (2008) 235 CLR 125, 158 at [107] (per Hayne, Heydon and Crennan JJ), citing Harman v Secretary of State for Home Department [1983] 1 AC 280 at 308. Although often referred to as “the implied undertaking”, it is better understood as a substantive legal obligation: Hearne v Street (2008) 235 CLR 125, 131 at [3] (per Gleeson CJ) and at [107]-[108] (per Hayne, Heydon and Crennan JJ). The obligation is an obligation to the court. For that reason, breach is treated as contempt: Hearne v Street (2008) 235 CLR 125, 158 at [106] (per Hayne, Heydon and Crennan JJ), citing Bourns v Raychem Corporation [No 3] [1999] 1 All ER 908.

5    It is common place, however, notwithstanding the existence of that substantive legal obligation, for parties to insist on express undertakings to similar effect. That is appropriately done “in relation to documents which it is particularly desired to keep secret” in order “to bring explicitly home to the minds of those giving it how important it is that the documents only be used for the purpose of proceedings”: Hearne v Street (2008) 235 CLR 125, 162 at [116] (per Hayne, Heydon and Crennan JJ). See also Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550 at [36] (per Bergin J, as her Honour then was) (express undertakings “would be expected to heighten the consciousness for sensitivity and diligence in ensuring that the information remains confidential”).

6    In Legal Profession Complaints Committee v Detata [2012] WASCA 214 Martin CJ (with whom Pullin and Murphy JJA agreed) observed at [48] that “[t]he importance of legal practitioners performing their undertakings cannot be overstated”. The Chief Justice continued:

[48] … The practice of giving, and relying upon, undertakings given by legal practitioners is widespread and serves an important public purpose. The circumstances in which undertakings are given and relied upon are many and varied. In some cases an undertaking will be proffered and received as a substitute for strict or timely performance of an obligation, perhaps arising under a contract or under a statutory provision. In other cases, the undertaking might be given in order to provide a form of security to the person to whom it is proffered — for example, an undertaking that an executed document will be held in escrow until certain conditions are met…

[49] Undertakings will often be proffered and received in the course of legal proceedings — for example, in relation to interlocutory procedures. The provision of undertakings in those circumstances serves the public interest by reducing or averting interlocutory disputes.

…

[51] Undertakings can only serve these purposes and thereby further the public interest if they are accepted and relied upon…

[52] The proffer of an undertaking binding upon a legal practitioner and his or her firm can be expected to enhance the reliability of the undertaking, and thereby the prospect that it will be accepted and relied upon by the party to whom it is proffered. In this way, the proffer of an undertaking binding upon a legal practitioner enhances the achievement of the various purposes to which I have referred, and thereby enhances the public interest. It is therefore vital that legal practitioners perform their undertakings, regardless of whether the undertaking was proffered in error or oversight, irrespective of any change in circumstances, no matter how radical, and irrespective of any hardship to the legal practitioner concerned.

[53] Further, it is vital for the maintenance of public confidence in the integrity of the legal profession and its practitioners, and for the maintenance of the confidence which practitioners have in dealing with each other, that performance of their undertakings be enforced.

(Citations omitted).

7    It is for those reasons, as Martin CJ explained (at [2012] WASCA 214 at [54]) that “the obligation of a legal practitioner to perform his or her undertaking is a solemn obligation of the utmost importance. Failure to perform that obligation will generally be regarded as professional misconduct, and depending on the circumstances, will often be regarded as serious professional misconduct.”

8    In the case of an undertaking given by a legal practitioner to a court, the court can order its enforcement and, if the undertaking is violated, be made the subject of contempt proceedings: see, by way of example only, Al-Kandari v J. R. Brown & Co [1998] QB 665, 675 (per Bingham LJ) (a legal practitioner “is subject to an enforceable obligation to observe the professional standards binding upon him as … an officer of the court. He is liable in contempt if he breaks an undertaking given by him to the court…”)

The competing contentions

9    As noted above, Kraft recently issued a subpoena against Mondelez requiring it to produce certain transaction documents which, it is now agreed, are relevant to this proceeding. Those documents were recently produced to the Victorian Federal Court Registry in compliance with the subpoena.

10    It is not necessary for present purposes to describe the subpoenaed documents. It is sufficient to say that Mondelez submits that particular parts of those documents are highly confidential to Mondelez and that it is a competitor of Kraft. Mr Syme, the Director – Commercial Finance ANZ & Japan of the Mondelez International group of companies, explained why in an affidavit. He was not cross-examined. Kraft’s external legal advisors now accept the basis of the claim to confidentiality, namely that the documents contain information that is akin to a trade secret, such that if the documents were, for example, inspected by Kraft’s commercial people, or its in-house counsel, the information once revealed and known could not be forgotten. And, once not able to be forgotten, the information is of such a character that, once disclosed, it would be impossible to know when and how the information had been used. As Hayne JA (as he then was) explained in Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38:

Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. Is that necessary for the attainment of justice in the particular case?

11    At hearings conducted on 26 June, and 2 and 4 July 2018, the question (among others) was debated about the terms upon which Kraft’s barristers and their instructing solicitors should be permitted to inspect and retain unredacted copies of the confidential documents for the duration of the proceeding, and any appeal or appeals that may eventuate.

12    Senior Counsel for Mondelez, Mr Heerey QC (who appeared with Ms Hickey and later with Mr Peckham) submitted that the Court should make an order in this form:

1. On or before 4pm on 6 July 2018, Mondelez Australia (Foods) Ltd (MAFL) shall provide by hand to each of Peter Hallett of the Applicant’s solicitors and Hayden Martin of the Respondent’s solicitors one unredacted copy of each of the agreements referred to in paragraphs 5(a) and 7(a) of the affidavit of Andrew Syme dated 25 June 2018, which, subject to further order:

(a) shall be imprinted by MAFL with a water mark stating “Confidential document to be kept by Peter Hallett, not copied by any person and otherwise kept confidential in accordance with the Order of O’Callaghan J made 6 July 2018” and a corresponding water mark for the copies provided to Hayden Martin;

(b) may be disclosed by Mr Hallett to Tim Allen of Spruson & Ferguson, and Rodney Garratt QC, Peter Gray QC and Ian Horak of the Victorian Bar;

(c) may be disclosed by Mr Martin to Justine Munsie of Addisons, Craig Smith of the Victorian Bar and Anthony McGrath of the New South Wales Bar;

(d) may be discussed amongst the persons identified in paragraphs (b) and (c);

(e) must not be disclosed to or discussed with any person other than those identified in paragraph (b) and (c);

(f) must not be copied by any person;

(g) must not be used for any purpose other than this proceeding;

(h) must be kept by Mr Hallett in a locked drawer or other locked storage mechanism, to which only Mr Hallett and Mr Allen may hold a key and have access;

(i) must be kept by Mr Martin in a locked drawer or other locked storage mechanism, to which only Mr Martin and Ms Munsie may hold a key and have access;

(j) if not received into evidence in the trial of this proceeding, must be returned by hand to one of MAFL’s solicitors or counsel within seven days of the conclusion of the trial;

(k) if received into evidence in the trial of this proceeding, must be returned by hand to one of MAFL’s solicitors or counsel within seven days of the conclusion of this proceeding or any appeal therefrom.

2. Any party seeking to tender the documents referred to in paragraph 1 must give reasonable advance notice to MAFL (by emailing [email addresses inserted]) to enable MAFL an opportunity to apply to the Court for orders restricting access to, publication of and use of confidential information in those documents, including without limitation orders under Part VAA and section 23 of the Federal Court of Australia Act 1976 (Cth) and rule 20.03(2) of the Federal Court Rules 2011 (Cth).

13    Mr Heerey submitted that I should have regard to a number of factors summarised by Besanko J in AstraZeneca AB v Medis Pharma Pty Ltd [2014] FCA 549. In that case, the issue was whether four named individuals should be admitted into a “Confidentiality Club” for the purposes of a patent case. In deciding that question, Besanko J said (at [10]) that the following matters were relevant:

…

(3) In determining where the balance lies in a particular case, a number of matters are relevant, including the following:

(i) the nature and content of the confidential information;

(ii) the extent to which, if the confidential information is disclosed to a particular person, that person will have occasion to use the information to further a party’s commercial interests. In this context, involvement or lack of involvement in competitive decision-making will be relevant. It will also be relevant to consider whether the person to whom it is proposed to disclose the information owes or may owe contractual, statutory or fiduciary duties to their principal in relation to competitive decisions.

(iii) the professional attributes of the persons to whom it is proposed to disclose the information and the extent to which they have participated in confidentiality clubs in the past.

(iv) the extent to which the Court can be satisfied that, if confidential information is released to a person, that person, or the organisation for which the person works, has in place a security system that will protect the confidentiality of the information.

(v) undertakings given by the proposed recipient of the confidential information or the party seeking disclosure to meet any loss caused by inadvertent or accidental disclosure.

(vi) although the above five matters are directed, primarily at least, to the risk of inadvertent or accidental disclosure of the confidential information and the likely loss if that occurs, on the other side of the equation, it is relevant to consider the extent to which a party’s ability to seek advice and provide instructions may be hampered if a claim for confidentiality is upheld. In this context, it is worth noting that a claim for confidentiality in relation to certain persons is not necessarily to be upheld because there is already one person able to seek advice and provide instructions. It may be appropriate for a number of people from within an organisation to have access to confidential information in order to seek appropriate advice and provide informed instructions, particularly in the case of a large organisation and complex litigation. Whether that is so or not depends on the outcome of weighing the relevant factors.

(Citations omitted).

14    Having regard to those principles, Mr Heerey submitted that an order framed in the terms he sought was appropriate because:

(1)    Bega agrees that, subject to reserving the right to object to tender of the confidential documents in their redacted form on the basis of relevance, the tender may be made pursuant to s 48(4) of the Evidence Act 1995 (Cth);

(2)    there is, therefore, no current need for Kraft’s external lawyers (that is, the barristers and their instructing solicitors) to have possession of, or access to, the confidential documents;

(3)    Kraft’s external lawyers cannot demonstrate that they will suffer any prejudice;

(4)    there is no need demonstrated for 5 copies of the confidential documents to be made available;

(5)    at best, only one copy should be provided, to Mr Hallett, who could then make it available to counsel and Mr Allen, if and when they wanted it; and

(6)    the purpose of the limitations contained in the order was to guard against the risk of “a mistake or a mishap” because “mistakes can happen and do happen from time to time”.

15    Senior Counsel for Kraft, Mr Garratt QC, who appeared with Mr Horak, submitted that the Court should make an order in this form:

On or before 4pm 6 July 2018, subject to Mr Peter Hallett of the Applicants’ solicitors providing an undertaking in the form in Annexure 1 to this order, Mondelez Australia (Foods) Ltd (Mondelez) provide to Mr Peter Hallett an unredacted copy of each of the agreements (in which Mondelez claims confidentiality) provided pursuant to the subpoena dated 1 June 2008 with access to that document being restricted to:

(a)    Mr Rodney Garratt QC;

(b)    Mr Peter Gray QC;

(c)    Mr Ian Horak of Counsel;

(d)    Mr Peter Hallett of Spruson & Ferguson Lawyers; and

(e)    Mr Tim Allen of Spruson & Ferguson Lawyers; and

(f)    any other person that may be agreed in writing with Mondelez subject to each such person given access to the aforementioned documents providing the undertaking in Annexure 1 to this order, and such documents may include a watermark or other notation designed to indicate confidentiality.

16    The form of the undertaking referred to is substantially as follows:

CONFIDENTIALITY UNDERTAKING

I _______________________________________ of ______________________________________ acknowledge that I am to be given access to certain Confidential Information (as defined in the Schedule) of Mondelez Australia (Foods) Ltd (Mondelez) in the course of the Proceeding.

As a condition of access to the Confidential Information, I provide the following undertakings to the Court and to and for the benefit of Mondelez:

1.    Subject to any order of the Court, I will keep confidential and will not disclose, or allow to be disclosed, the Confidential Information, to any person except:

(a)    the Court (including in an affidavit or statement of evidence in the Proceeding), provided that:

(i)    reasonable steps have been taken to identify the Confidential Information as confidential and to inform the Court that the Confidential Information is subject to a claim of confidentiality by Mondelez; and

(ii)    advance notice has been given to Mondelez (by emailing [email addresses inserted] to enable Mondelez an opportunity to apply to the Court for orders restricting access to, publication of, and use of, the Confidential Information, including without limitation orders under Part VAA and section 23 of the Federal Court of Australia Act 1976 (Cth) and Rule 20.03(2) of the Federal Court Rules 2011 (Cth);

(b)    the individuals referred to in paragraph 1(a) to (e) of the Orders of O'Callaghan J dated [insert date], provided they have given a written undertaking in the terms of this document;

(c)    with the prior written consent of Mondelez;

(d)    by order of the Court; or

(e)    as required by law, and I will to the extent permitted by law give to Mondelez notice of any such disclosure as soon as possible in advance of such disclosure and I will take into account Mondelez’s reasonable requirements as to the timing, content and manner of such disclosure.

2.    Subject to paragraph 1 above and any order of the Court or written permission given by or on behalf of Mondelez, I will only use the Confidential Information for the purposes of taking steps in relation to the Proceeding.

3.    I will establish and maintain reasonable security measures to safeguard the Confidential Information from unauthorised access, use, copying or disclosure. I will immediately notify Mondelez of any suspected or actual unauthorised access, use, copying or disclosure of the Confidential Information of which I become aware, and I will take such steps as Mondelez may reasonably require in relation to such unauthorised access, use, copying or disclosure.

4.    Upon the discontinuance, dismissal, settlement or final determination of the Proceeding including any appeals:

(a)    I will return all physical copies of documents containing the Confidential Information in my possession or control, to Mondelez or its solicitors;

(b)    I will destroy all electronic copies of documents containing the Confidential Information in my possession or control; and

(c)    I will give written confirmation of such to the solicitors acting for Mondelez upon completion of those actions.

5.    The restrictions in this Confidentiality Undertaking shall not apply if any of, and to the extent that, the Confidential Information:

(a)    is in, or enters, the public domain other than as a result of a breach of a confidentiality obligation or undertaking; or

(b)    subject to any pre-existing confidentiality obligation which still applies in respect of them, was possessed by or known to me before being disclosed by Mondelez other than as a result of a breach of a confidentiality obligation or undertaking.

Signed by:    _______________________________________

Print Name:    _______________________________________

Date:        _______________________________________

SCHEDULE

[OMITTED]

17    Mr Garratt clarified during oral submissions that it is intended that each of Messrs Garratt, Gray, Horak, Hallett and Allen (and any person that may subsequently be agreed) give the undertaking in that form.

18    Mr Garratt submitted during oral submissions as follows:

Your Honour, the question of relevance is one for the documents. The documents are relevant. That is not in issue. The regime which has been proposed keeps the documents within the hands only of independent legal representatives… [In] AstraZeneca … [it] was … common ground … that there was a confidentiality club comprising those people who [had] unfettered access subject to preserving the confidentiality to those documents. What my learned friend now proposes is a bizarre further restriction for which there is no authority…

If Mr Hallett is sick, then we can’t have a discussion. If I wanted to have a discussion with my junior about the document, I can’t because neither of us can have a copy. This is absolutely truly bizarre. We are responsible practitioners. The undertaking provides in paragraph 3 that each of us will establish and maintain reasonable security measures to safeguard the confidential information from unauthorised access or use ... Mistakes can happen, my learned friend says. Well, mistakes can happen also inside his client. Nothing in life is risk free. These sorts of systems have been put in place and used again and again in the conduct of litigation for many decades at least. Yet, there’s no authority which justifies this sort of, as I say, bizarre refinement…

… [I]n the lead up to trial, for example, and during the conduct of the trial, the independent lawyers should have access to them, free access between themselves to them, and the documents will be kept secure and returned after the finalisation of the proceedings which, of course, could go to an appeal. That is the most that is ever done, and it seems to have worked perfectly well generally in the legal profession. It has been – nothing that’s pointed to that suggests that those procedures don’t work…

Consideration

19    The effective administration of justice depends upon the practitioners honouring their obligations, including the “implied” obligation in a party obtaining discovery or documents on subpoena or otherwise, not to use them for any other purpose without leave, and the obligations that arise when an express undertaking is proffered to a court. It is, as Martin CJ said in Legal Profession Complaints Committee v Detata [2012] WASCA 214 (see [5] above), vital for the maintenance of public confidence in the integrity of the legal profession and its practitioners, and for maintenance of confidence within the legal profession, that undertakings be enforced. And that is obviously as true of “implied” undertakings as it is of express undertakings.

20    It is equally important that, unless some good reason can be shown in the particular circumstances of a case why a practitioner’s undertaking should not accepted, or why the form of it may not be adequate to achieve the stated purpose (here, to preserve the confidentiality of information akin to a trade secret), then the effective administration of justice depends upon the court, the parties and in cases like this, the non-party seeking protection (especially when, in a case such as this, they are sophisticated commercial entities) proceeding on the basis that those persons proffering the undertakings will indeed do that which they undertake to do. Undertakings are not lightly made. On the contrary, they are “a solemn obligation of the utmost importance”: Legal Profession Complaints Committee v Detata [2012] WASCA 214 at 54 (per Martin CJ). They are made, in a case such as this, in the face of the recognition or acceptance by the persons proffering them that the documents in respect of which the undertakings are to be given in fact contain information akin to a trade secret. The effective operation of the legal system and the administration of justice depends upon the court accepting that, as responsible members of the legal profession, those giving the undertakings will do as they say.

21    In those circumstances, I cannot accept the submission put on behalf of Mondelez that the risk of a mistake or a mishap justifies the regime it proposes, including that only a single copy of the documents be provided. I also do not agree that the principles referred to by Besanko J in AstraZeneca AB v Medis Pharma Pty Ltd [2014] FCA 549 at [10] have any relevance in a case such as this where the court is asked to agree to the terms upon which admittedly confidential, and relevant, documents may be provided by a non-party to a litigant’s legal advisors. The issue in AstraZeneca AB was whether it was necessary for the attainment of justice in that case to expand the membership of a “Confidentiality Club” in a patent case to include four lawyers, three of whom were in-house lawyers who worked for one or other of the parties to the litigation. In such circumstances, one can readily understand why factors such as (i) whether the extent to which, if the confidential information were disclosed to them, the putative members would have occasion to use the information to further their employer’s commercial interests; (ii) their “professional attributes”; (iii) their involvement in Confidentiality Clubs in the past; or (iv) the security systems that they may have in place, and so on, could all be weighed in the balance in determining whether to admit them to the Club. But they are not factors, in my opinion, which have any bearing in a case like this.

22    Accordingly, I will make orders substantially in the form of the minute of proposed order submitted by Kraft. I will also hear from Bega about whether it wishes for an order in similar terms to be made with respect to its external legal advisors.

Associate:

Dated:    6 July 2018