RED BULL NEW ZEALAND LTD v DRINK RED LTD

Court of Appeal, French, Fogarty and Collins JJ, 3 July 2016, 4 August 2016, [2016] NZCA 373

Interim injunction – appeal against refusal – fresh evidence – whether respondent deliberately misled the Judge at interim injunction hearing – whether balance of convenience favoured the appellant in light of fresh evidence – whether Court of Appeal should exercise its discretion to issue injunction in light of fresh evidence

Interim injunction – relevance of intention

Evidence of confusion – admissibility – whether survey exercise

Facts:

The first plaintiff (Red Bull New Zealand Ltd) was the New Zealand entity created by the second plaintiff (Red Bull GmbH) (together, the plaintiffs) to supply its well-known RED BULL energy drink. The second plaintiff was a global energy drink producer and supplier. The first plaintiff commenced trading in New Zealand in 1997. It was the registered proprietor of six New Zealand trade marks, including the word marks RED BULL and RED EDITION, as well as stylised depictions of the words RED BULL in the colour red, and the word in  in red and in black colours. The latter were primarily relied upon for the proceeding and were referred to as the plaintiffs’ “Red Series Marks”. The plaintiffs’ energy drinks were consumed on their own as well as part of a popular cocktail in combination with vodka (vodka and RED BULL or sometimes RED BULL vodka).

The first defendant (Drink Red Ltd) was created by two individuals, Messrs McCormick and Samson, seeking to produce an energy drink and ready-to-drink (RTD) similar to vodka and RED BULL. In or around February 2014, Mr Samson approached a marketing company known as Strategy Design and Advertising (Strategy). In June 2014, Strategy provided Messrs McCormick and Samson with a report (the June 2014 report) containing a process for naming the proposed energy drink and RTD.

The June 2014 report included a page depicting cans of the first plaintiff’s products; statements that a similar design to the first plaintiff’s get-up would be “the most effective way to tap into Red Bull’s equity”; a passage referring to examples that were a “Direct Pass Off” of the first plaintiff’s get-up; that one option for consideration was to “pass off the Red Bull name”; and that a red-coloured get-up would “allow us to tap into some of Red Bull’s equity in an original way”.

Following receipt of the June 2014 report, the first defendant was incorporated. A further company, Drink Red (Australasia) Ltd (the second defendant) was also incorporated.

In February 2015, the first and second defendants began selling a vodka and energy drink product called RED, with a stylised reversed R. The word RED was coloured black and was depicted over a red angled stripe on cans of the drink. On 20 February 2015 the plaintiffs sent the first and second defendants a letter of demand, requiring the withdrawal of the products from sale.

On 22 February 2015, Mr Cranko, managing partner of Strategy, sent an internal email (the February 2015 email) to two Strategy employees. That email instructed those staff to prepare a new report (the February 2015 report) that “highlight[s] all the differences” between the first plaintiff and first defendant’s products. The email said to “remove any comments on the [June 2014 report] that relate to ‘passing off’ or creating confusion with Red Bull”. It also said to “do another search of all names that include Red in them … we need to show this is a generic name”. The email was headed “privileged”.

The first and second defendants refused to withdraw their products from sale and proceedings were commenced on 20 May 2015, alleging breach of the Trade Marks Act 2002, passing off and breach of the Fair Trading Act 1986.

The third defendant was then incorporated. It began selling cans of a non-alcoholic drink called RED ENERGY in November 2015 (with a stylised reversed R and closely similar get up).

An application for an interim injunction preventing the defendants from advertising, selling or otherwise dealing in their products was filed on 11 December 2015.

At the hearing before Brewer J, the defendants adduced a document called “Naming and Identity Process, Red – Vodka & Energy”, dated May 2015 (the May 2015 report). It was largely a reproduction of the February 2015 report. The May 2015 report was described by Mr Cranko in his affidavit as being compiled by “identifying ten representative pre-existing representations and collating them into a single, summary presentation”. The June 2014 report was not put before the Court.

The plaintiffs relied on evidence in support of their application that the defendants had referred to the plaintiffs’ RED BULL products in trade promotion material. They also relied on evidence gathered by two barristers of confusion amongst retailers and suppliers of RTD products in Auckland, Wellington and Christchurch. That evidence comprised statements made by shop assistants of off-licence alcohol retailers when asked (both by phone and in person) about the defendants’ products. The barristers also attended a number of on-licence premises.

Brewer J was satisfied that the plaintiffs had established a “serious question to answer” with respect to its allegations. But the Judge was not satisfied that the evidence established a “strong prima facie case” with respect to the same. In considering the balance of convenience, the Judge held that the balance favoured the defendants because he accepted their contentions that they would go out of business were an injunction granted. The application was refused.

Subsequently, the defendants completed discovery and the plaintiffs discovered the existence of the June 2014 report (through non party discovery) and the February 2015 email.

On appeal, the plaintiffs made two applications under r 45(1) of the Court of Appeal (Civil) Rules 2005 for fresh evidence to be adduced. The first application was for the Court to consider the June 2014 report, and changes made from that report that were not included in the May 2015 report presented to Brewer J. The second application was for the Court to consider the February 2015 email.

Held, granting the fresh evidence applications, allowing the appeal and granting an interim injunction until further order of the High Court:

Per French and Collins JJ (Fogarty J dissenting):

(1)     Fresh evidence

  1. Rule 45(1) of the Court of Appeal (Civil) Rules 2005 permits the Court of Appeal to consider evidence not adduced at first instance where that evidence is fresh, credible and cogent. The jurisdiction is exercised sparingly. Relevant factors to the exercise of discretion will be whether the evidence could have been adduced with reasonable diligence and the cogency and materiality of the evidence in question. The paramount question is the overall interests of justice. 

    Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) and Erceg v Balenia Ltd [2008] NZCA 535 referred to.

  2. The plaintiffs could not have obtained the June 2014 report prior to the injunction hearing because the defendants failed to comply with timetable directions requiring them to provide discovery, and because they only provided their evidence in opposition to the interim injunction two days before the hearing [68]. The evidence was material and cogent [69]. Mr McCormick, who had exhibited the misleading evidence in the High Court, was intimately involved in the creation of the defendants and those defendants traded on decisions made by him prior to their incorporation [69].

  3. The fresh evidence demonstrated that the May 2015 report presented to Brewer J and relied upon by the defendants was misleading [70]. The impression created by the May 2015 report led the Judge to hold that the defendants had no intention to pass off its goods as those off the first plaintiff [71]. The subsequent actions of the defendants in altering the June 2014 report demonstrated an intention to erase any evidence of a link between the defendants’ products and the plaintiffs’ products [73]. The present circumstances were an example of a rare instance in which the Court of Appeal would consider new evidence that should have been placed before the High Court Judge and re-exercise the interim injunction discretion [72].

  4. Intention on the part of the defendants was relevant in three respects. A defendant’s intentional use of a plaintiff’s intellectual property was a factor which strengthened a plaintiff’s case in relation to passing off and breach of the Fair Trading Act. Intention was also relevant to the cause of action under s 89(1)(d). The extent to which the defendants had acted intentionally was also relevant to the balance of convenience and interests of justice [27].

(2)      Serious question to be tried

  1. This was not the case to decide whether the conventional “serious question to be tried” threshold for the grant of an interim injunction should be displaced by a test of “strong prima facie case” where the defendant would cease trading if the injunction were granted [76]. This was because the Court was satisfied the Judge would have been persuaded that there was a strong prima facie case if the fresh evidence had been placed before him [76].

    Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC), Finnigan v New Zealand Rugby Football Union Inc (No 2) [1985] 2 NZLR 181 (HC), DB Breweries Ltd v Lion Nathan Ltd (2007) 12 TCLR 25 (HC), Meat Services Ltd v Moses (1983) 1 TCLR 94 (HC), and Watson & Son Ltd v Active Manuka Honey Association Inc HC Hamilton CIV-2008-419-1495, 30 July 2009 referred to.

  2. The Judge made a number of findings in favour of the plaintiffs’ application for an interim injunction [77]. The Court was confident that had the Judge been made aware of the new evidence that showed the defendants intended to trade off the plaintiffs’ intellectual property, he would have been satisfied the plaintiffs had demonstrated a strong prima facie case [79].

(3)     Balance of convenience

  1. The Judge erred in law by failing to have regard to the fact that the defendants were the authors of their own inconvenience [82]. A relevant factor to be weighed when assessing the balance of convenience is whether the party against whom an injunction is being sought has proceeded “with their eyes open” [83]. These principles applied in this case [86].

    Wholesale Distributors Ltd v Songle Supermarket Ltd [2014] NZCA 565, (2014) 16 NZCPR 14 at [30], Bleiman v News Media (Auckland) Ltd [1994] 2 NZLR 673 (CA), Black White & Grey Cabs Ltd v Hill HC Wellington CP1013/91, 7 February 1992 applied.

  2. There was evidence to support the plaintiffs’ view that the defendants would not necessarily cease trading if an interim injunction was issued [84]. Further, the fact that the substantive proceeding was to commence on 31 October 2016 (three and a half months after the hearing) was outweighed by the Court’s deep concern that the Judge was misled on material facts, and its conviction that the Judge would have issued an interim injunction if the full facts had been put before him [85].

(4)     Overall justice

  1. The plaintiffs had lost the benefit of an injunction they were entitled to had the defendants not misled the Court deciding the interim injunction application [87]. Allowing the defendants to avoid the consequences of an interim injunction would not only encourage misleading behaviour in the future, but bring into question the integrity of the administration of justice. To allow a party to keep the spoils so unworthily obtained of having misled the Court in a material matter was not a state of affairs the Court could countenance [87].

    Meek v Fleming [1961] 2 QB 366 (CA) referred to.

(5)     Evidence exercise undertaken by barristers

  1. The majority held no concerns as to the admissibility of the evidence exercise undertaken by the two barristers. Their evidence of what they were told by shop assistants was not hearsay, and was not purporting to be a survey of consumers. Authorities on survey evidence were therefore not relevant. In addition, it was reasonable to assume retailers had a better product knowledge than consumers so confusion on the part of retailers was telling [32].

(6)        Dissenting judgment of Fogarty J

  1. The majority disagreed with Fogarty J that Brewer J would not have reached different conclusions about the strengths of the plaintiffs’ case and the balance of convenience had the new evidence been properly placed before him [88]. The issues identified by Fogarty J relating to the strength of the first plaintiff’s intellectual property in its Red Series Marks had not been argued before the Court of Appeal and had not been pleaded, relied upon or suggested by the defendants [88]. The authorities cited by Fogarty J were not relevant to the issues on appeal [88].

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